VALVOLINE (VVV)·Q1 2026 Earnings Summary

Valvoline Delivers 11% Revenue Growth as Breeze Acquisition Fuels Store Expansion

February 4, 2026 · by Fintool AI Agent

Valvoline Inc. (NYSE: VVV) reported strong first quarter fiscal 2026 results, posting 11% revenue growth and 200 net store additions as the Breeze Autocare acquisition begins contributing to the company's growth algorithm.

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Did Valvoline Beat Earnings?

Yes — Valvoline beat on all key adjusted metrics. CEO Lori Flees noted: "We delivered a strong quarter to start the fiscal year, driven by strong productivity gains in our stores, network expansion, and margin improvement, which translated to meaningful earnings growth."

CFO Kevin Willis highlighted gross margin improvement: "We were up about 50 basis points year-over-year. Labor and product were the primary drivers... We've not only held on to but been able to improve upon that labor leverage a bit."

GAAP results reflected a loss of ($32.2M) from continuing operations due to the FTC-required divestiture of certain Breeze stores, resulting in diluted EPS of ($0.25). This non-cash charge masked the underlying strength of the business.

When adjusting for last year's refranchising transaction, growth was even stronger: revenue +15%, adjusted EBITDA +18%, and adjusted EPS +28%.

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What Drove the Quarter?

Same-Store Sales: +5.8%

System-wide same-store sales grew 5.8% year-over-year, demonstrating continued resilience in consumer demand for preventive auto maintenance. System-wide store sales reached $924 million, up 13% year-over-year.

Note: SSS growth moderated from 8.0% in the prior year quarter, reflecting normalization from post-pandemic peaks but still well above historical averages.

Network Expansion: +200 Net Stores

The highlight of the quarter was aggressive network expansion:

The Breeze Autocare acquisition contributed 210 stores acquired, with 45 immediately divested as required by the FTC. Net conversions between company-operated and franchised were minimal.

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How Did the Stock React?

Valvoline shares traded up +1.2% in after-hours to $33.70 following the release:

The stock remains down ~20% from its 52-week high of $41.33 set in November 2024, reflecting broader market concerns about consumer discretionary spending and integration risk from the Breeze acquisition.

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What Did Management Guide?

Valvoline reaffirmed its full-year fiscal 2026 guidance, which incorporates the Breeze acquisition:

Guidance Implies:

• Q1 revenue run-rate ($461.8M × 4 = $1.85B) suggests acceleration in coming quarters needed to hit the $2.0-2.1B target
• Adjusted EPS guidance of $1.60-1.70 implies remaining quarters need to deliver ~$1.23-1.33 in EPS (Q1 at $0.37)
• Leverage ratio at 3.3x adjusted EBITDA is expected to decline as EBITDA grows through the year

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What Changed From Last Quarter?

Key Deltas vs Q4 FY25:

*Values retrieved from S&P Global

Breeze Integration Underway

CEO Lori Flees noted: "The Breeze business is performing in line with our expectations and integration activities are underway."

The acquisition of Oil Changers stores (Breeze's primary brand) represents a significant step in Valvoline's strategy to consolidate the fragmented quick-lube market. CEO Flees provided context on the integration: "While a sizable M&A, Breeze represents less than 10% of our financial commitments for FY 2026."

Franchise Pipeline Healthy

While franchise openings were modest in Q1 (10 net new), CEO Flees reassured investors: "When we look at January, our franchise partners have opened nine units in January. So again, a real indication that the pipeline is robust." The company remains on track for 250 net new units in FY2027.

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Capital Allocation & Cash Flow

Operating cash flow improved 57% year-over-year to $64.8M. The company distinguishes between maintenance capex ($8.8M) and growth capex ($48.6M), highlighting the investment-intensive nature of the store expansion strategy.

Balance Sheet

Total debt increased ~$590M primarily due to the new Term Loan B financing for the Breeze acquisition.

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Q&A Highlights

Winter Storm Fern Impact on Q2

CEO Flees addressed weather disruption: "Apart from Winter Storm Fern, our start to the quarter was really strong. Now, with the snow and ice conditions that hit many of the geographies that we operate in, particularly on the company side, momentum obviously slowed."

Management noted January momentum was strong before the storm, and historically customers return once conditions normalize rather than deferring maintenance long-term.

Ticket vs Transaction Breakdown

CFO Willis clarified same-store sales composition: "Ticket was roughly three-quarters of the comp. But again, as we look at the comp, we saw growth in all those categories... on the transaction side. And in terms of ticket, also positive in terms of price premiumization and NOCR for the quarter."

Mobile Service Expansion

The company disclosed mobile service delivery contributed approximately 20 basis points to same-store sales this quarter, though it remains in pilot phase in a couple of markets.

Why Premiumization Persists Despite Macro Concerns

CEO Flees explained the resilience: "Valvoline is a strong brand and business in a category that, as you know, is nondiscretionary... As the new vehicles start to age into the car parc, the automotive manufacturer is the one who specs the kind of lubricant that is required."

She added that 35-40% of new customers come from dealerships, attracted primarily by Valvoline's convenience rather than price trade-down.

Share Repurchase Timing

When asked about the 18-24 month deleveraging timeline, CFO Willis signaled flexibility: "If we get there sooner, then we will, in fact, start repurchasing shares sooner as well." The leverage target is 2.5x net debt/EBITDA, currently at 3.3x.

National Ad Fund Coming FY2027

Management disclosed plans to launch a national advertising fund in fiscal 2027, driving efficiency as network density improves. CEO Flees noted: "As our network has grown and the reach and densification has improved, moving from a hyper-local-only marketing spend to a national fund drives significant efficiency."

Material Weakness Update

CFO Willis provided a timeline for resolving the internal control material weakness: "It's certainly our expectation that by the end of this fiscal year, we will be able to put this to bed." CEO Flees emphasized there are no concerns about the accuracy of financial statements—the issue relates to business process control documentation.

Breeze Financial Impact

CFO Willis quantified the Breeze contribution for the 10 months of ownership in FY26:

• $160 million of top-line revenue
• $31 million of EBITDA
• ~$0.20 per share EPS impact (dilutive due to interest expense)

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Management Outlook

CEO Lori Flees expressed confidence in the company's trajectory: "We are encouraged by our first quarter results, and I want to thank our teams and franchise partners for their work to deliver them. The fundamentals of our business model and resilient customer demand continue to give us confidence in our growth algorithm."

Key Forward Considerations:

1. Breeze Integration — 162 stores now being integrated; synergy realization timeline will be a focus
2. SSS Trajectory — 5.8% growth remains healthy but moderating from prior year's 8.0%
3. Leverage — Debt increased significantly; deleveraging path will be important to watch
4. CapEx Investment — Continued heavy investment in store openings and growth

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Key Takeaways

✓ Revenue: $461.8M, +11% YoY (beat estimates by ~1.5%)

✓ Adjusted EPS: $0.37, +16% YoY

✓ Same-Store Sales: +5.8% system-wide, moderating but resilient

✓ Network Growth: +200 stores (162 from Breeze acquisition)

✓ Total Stores: 2,380 (+16% YoY)

✓ Cash Flow: Operating cash flow +57% YoY to $64.8M

⚠️ Watch: GAAP loss due to FTC divestiture charges; elevated debt from Breeze financing; Winter Storm Fern impact on Q2; material weakness remediation expected by fiscal year-end

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Valvoline Q1 FY2026 earnings call held on February 4, 2026. View Valvoline investor relations for replay and materials.