Valvoline to Separate Segments

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Valvoline to Separate Segments
Trucks at the loading dock of a Valvoline Canada facility in Mississauga, Ontario. © JHVEPhoto

Valvoline is further restructuring its business model, announcing this week it will separate its two business segments, Retail Services and Global Products, at some point in the future. The company shifted to a more service-driven strategy earlier this year, consolidating three segments into two, in an effort to accelerate growth.

Valvoline, based in Lexington, Kentucky, said it is still “determining the best way to accomplish the separation,” and that no timetable has been set for its completion.

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“Following a comprehensive review of strategic alternatives by the Valvoline board of directors and executive management, we believe that a separation of our business segments will create significant and sustainable value for our shareholders, employees and other stakeholders, and will best position the Retail Services and Global Products businesses for continued long-term success,” Stephen Kirk, chairman of the Valvoline board, said in an Oct. 12 press release.

In May, Valvoline announced it would restructure its business model for the third quarter of this year, renaming its Quick Lubes segment to Retail Services and consolidating its Core North America and International segments into Global Products. Retail Services comprises Valvoline’s oil change stores in the United States and Canada, while Global Products focuses on sales of lubricants and other maintenance products through channels other than quick lubes.

The company said it believed the changes would lead to accelerated growth.

“Our confidence in separating these two strong businesses reflects the tremendous progress we have made in our strategic transformation,” Valvoline CEO Sam Mitchell said. “The separation will allow Retail Services to continue its growth and focus on leveraging its world-class service model. Global Products is a market-leading, high-cash-generating business, which we believe will thrive well into the future with the opportunity to focus and allocate capital to its own strategic priorities.”

Valvoline said it will report its full fiscal year 2021 results on Nov. 3, though based on current information it expects to report a 27% increase in sales for the year, compared to 2020. Retail Services is also expected to see same-store sales growth of 20% for the fourth quarter and 21% for the full year, compared to previous periods.

In its third quarter financial report, the company forecast same-store sales growth of 6%-8% and unit growth of 5%-7% annually for its Retail Services segment through 2024. Both new segments reported an increase in sales and operating income for the third quarter.