Valvoline Inc. (VVV) Earnings Call Transcript & Summary

All right, if everyone could take their seats. Next up on the CAGNY stage, we have Valvoline. Valvoline has been around for more than 150 years but it's still relatively new as a separate publicly traded company, having done an IPO about 3.5 years ago and with a final separation about 6 months later. They have a long history of product innovation with a well-known brand, but more and more, the growth of the company is coming from its retail services business, represented in its Quick Lubes segment where it operates and franchises stores that do preventative vehicle maintenance. Presenters today are Valvoline's CEO, Sam Mitchell; CFO, Mary Meixelsperger; and Tony Puckett, President of the Quick Lubes segment. With that, I'll pass it along to Sam.

All right. Thank you, Andrew. What we learned this morning when we kicked off, that Kellogg's was celebrating their 114th birthday, I believe, and I agree with Steve in that you have to do a lot of things right to last that long. Valvoline's now been in business now for over 154 years, but we do recognize that we're still new to a lot of investors. So it's really a pleasure to be here at CAGNY to tell our story, to tell the story of a business model that is very much consumer-driven and brand-driven and that is really quite different than the other companies that are presenting here this week. So do want to point out the safe harbor statement. There we go, it's moving. So please take a look at this. And as we get started, I've got a short video to share to introduce the company. Let's play that. [Presentation]

All right. So in that clip, you certainly saw plenty of products: lubricants, coolants, filters that are used in maintenance of automotive vehicles but heavy-duty engines, too. But you also saw on that video, stores, lots of stores and growing number of stores. So let's get into taking a look at the business. First, at a high-level overview, Valvoline did about $2.4 billion in revenue in fiscal 2019. Adjusted EBITDA is right around 20%. We have 3 major operating segments in which we report earnings: so Quick Lubes segment, Core North America and our International business. Taking a quick look at the Quick Lube business. This is our Valvoline Instant Oil Change business in the U.S., 1,300 stores. We're about 40% company-owned, 60% franchise so we got a nice balance there, and another 100-plus stores in Canada underneath the Great Canadian Oil Change banner. Take a look at the sales contribution. It's a little over 1/3 of the company's sales but contributing 45% of the company's EBITDA. So obviously, this business carries our strongest profit margin in the portfolio. Then turning to our Core North America business. Core North America has 2 major channels, both the DIY segment and the do-it-for-me segment. In DIY, we're selling through major retailers like Walmart, AutoZone, Advance Auto Parts, NAPA. And on the installer side, we service both large national accounts like Goodyear, tire repair chains and smaller garages, too. And when you put the 2 together, this business contributes 42% of our sales, 36% of our EBITDA margin, very strong cash-generating business. And then finally, our International business, which is 24% of our sales, a little bit less than that in terms of EBITDA contribution. That's because this business is primarily distributor-driven so it carries a little bit lower margin. We're selling both passenger car products and also products that service heavy-duty engines. The heavy-duty components are more important to us in developing markets like India and China. We have a very strong partnership -- global partnership with Cummins engines, the largest heavy-duty engine manufacturer in the world, both from a marketing and technology standpoint. And we operate 2 joint ventures with them in India and also in China. Just to help you visualize what it looks like in the U.S. market and these multiple channels to market. This could be Main Street, U.S.A., where you're going to see Valvoline products distributed, again through DIY channels and stores, also network like NAPA Auto Parts, an important customer to Valvoline, which services both DIY and especially the DIFM side of the market, servicing garages. We sell across multiple installers whether it's a car dealership or tire and repair. And of course, you've got Valvoline Instant Oil Change, too, which is becoming an increasingly important part of the mix. All in all, that's more than 50,000 retail outlets in the U.S. market. Back in May of 2019, we held an Investor Day presentation where we laid out our strategies and went deep into all areas of the business, but in summary, the portfolio strategy looks like this. We're going to aggressively grow our Quick Lube business. This is a business, again, that carries strong profit margins. The EBITDA target that we've laid out for the next 3 years is in the low double-digit to mid-teens. And so this is a business that we're investing aggressively in as we drive performance there. The Core North American business, we have a maintained strategy with that. So the Core North American business has been under pressure over the last couple of years, particularly in the DIY segment with the growth of private label. So really, we've been focused on how do we get this business stabilized for continued long-term performance. Had an aggressive cost reduction program that's benefiting the business in fiscal 2020. We've also been focused on how to bring more customer value, both in the DIY segment and the important installer channel segment. And we've been making good progress. Now our 3-year target for EBITDA growth is actually flat to a modest decline in this business, given some of the pressure. We did update our guidance for fiscal 2020 after our Q1 earnings. And after a strong Q1, we do expect that Core North America should be modestly up in EBITDA performance in fiscal 2020. So we are making progress towards stabilizing this business. And then finally on the International front, we expect to develop this business. This business has great growth potential for us long term. It's been growing at a healthy rate over the years past. It's a business where we are now solidly profitable in all the regions in which we compete and, certainly, great opportunities for growth in faster-growing markets like China and India, where we've really been increasing our investment. This is a business that we expect to grow in the mid- to high single-digit range over the next 3-year period. So today, we're really going to highlight the Quick Lube business. But if you want to dig deeper and learn more about Core North American business and the International business, I encourage you to go back to our investor website, where you can check out the Investor Day presentation. All right. As far as trends behind our strategy, these are very positive trends behind Valvoline's strategy for growth, and the first is the consumers' demand for convenience. When we were here 2 years ago, people were excited about Amazon Prime and 2-day delivery. Well, today, we don't think so much about 2-day delivery. We're thinking next-day delivery or even better yet, same-day delivery. I mean, the consumers' insatiable demand for convenience is something that is not stopping and that Valvoline, particularly with our Quick Lube business, is very well suited to take advantage of. And then more vehicles on the road. This is good for Valvoline. Even in the mature U.S. market, the vehicle population continues to grow roughly, expected to grow 25 million vehicles between now and 2023. And when you look at China, they're actually adding 25 million vehicles per year on average. And as I mentioned earlier, the heavy-duty business is very important to us, particularly on the International front. Heavy-duty business is huge on a global basis. 2.6 billion gallons of lubricants are sold in heavy-duty. Valvoline has a very small share of that but a growing share of that. And we're also well positioned to benefit from some of the recent trends, which are higher emissions requirements in countries like India and China, new emissions requirements becoming effective in 2020, '21 and '22 and beyond. And Valvoline is very well positioned with our higher-quality lubricants to meet those higher-spec emissions requirements. Taking a look then at our capital allocation and how the portfolio really works together for us. It's that Core North American business that generates a lot of cash. It's not capital-intensive by any means, but it's a business that has been a solid cash generator for us. Over the last 3 years, the business has generated close to $500 million in cash flow after CapEx. So with that investment potential, we're taking that cash flow generation and pulling that into the Quick Lube growth opportunities. Some in International too, but particularly in the U.S. Quick Lube market, Canadian market, we're seeing opportunities to invest in projects that will churn roughly 2x our cost of capital. So again, coming back to the Valvoline business model, this is a business model that generates very strong returns. The overall company, 20%-plus return on invested capital, very consistently with excellent growth opportunities in our growth engine and being the Quick Lube business. Our investment strategy is working. What you see here is the total system-wide retail sales for Valvoline Instant Oil Change, both company stores and franchise stores. So you see good steady growth between 2008 and 2015. This is because we are driving same-store sales performance but also working with our franchisees to drive store growth. We weren't in a position to invest in company store growth given that we are part of Ashland during this period, but you saw that we had good steady performance. But look at what's happened since 2015. As we've been able to invest back in this business, we've accelerated the growth of this business both in terms of same-store sales and in terms of the store growth. So now we're benefiting from the operational excellence that we have, store growth for companies, store growth with our franchisees. $1.4 billion in total revenue. That's roughly almost double where we were in 2015. So I mentioned operational excellence. I mean, this is how it gets done. This is part of our DNA. We're very focused on how do we improve our operations. And we've increased same-store sales now over the last 13 straight years and accelerated that over the last 5 years where it's been 8.2% average growth year-over-year. That happens because of 2 major things: number one is more transactions, attracting more customers to our stores, more cars per day. Our system averages -- company store system averages in the high 40s oil changes per day. OCPD is the term that we like to use. That's been growing consistently for us. Our top quartile stores perform in the mid-60s. So we do get asked the question, "Well, is there a capacity constraint issue here with your stores getting busier?" Well, certainly, we have very busy times during the day. But the fact that our top quartile is performing in the mid-60s shows you that we have plenty of room for growth within our existing stores, too. Now that's on the transaction side. On the ticket side, our average ticket is about $80 per customer visit. And that's been consistently growing for us, too. As more of the newer cars require synthetic oils, those at more expensive oil changes help drive ticket. But in addition to that, we're also focused on driving the other services that we offer beyond the oil change, which is an important part of the mix. And as we get better at executing within the stores, that continues to drive ticket. So the combination of the 2 gives us a lot of confidence that we have plenty of room for growth to continue to drive same-store sales performance in the years ahead. Let's take a comparative look at how Valvoline performs versus other retailers. First, if you highlight the automotive companies up here, you see Boyd Collision, good solid performance at roughly 5% comps. Monro Muffler Brake, been a flat business for them. And then the retailers in which we sell our products. This would be AutoZone, Advance, O'Reilly, et cetera, steady growth at roughly 3%. So obviously, Valvoline Instant Oil Change compares very favorably there. But even when you go outside of automotive, this retail business is world-class when you consider fast growth retail at 7% or the stable retail brands of Starbucks, McDonald's, Walmart, et cetera, at 3.7%. This business is becoming a world-class retail business. And again, as far as same-store sales growth, we see it continuing. The guidance that we've given over the next period is 6% to 8%. So our business model is shifting. Services, particularly our Quick Lube business, is becoming a bigger part of the mix. You see this in the pie chart where the Quick Lubes' EBITDA contribution has grown from 30% just 3 years ago to 45% in 2019. This is good for investors. This is good for our business model. This is the business, again, that carries the strongest profit margin. It's where we have the strongest competitive advantage and the most control as we distribute our products through this channel. And it's one with the longest and biggest growth opportunity in front of us. We're excited about this change. And how big is this opportunity? It's significant. In the U.S. market, there's 450 million oil changes done in the DIFM or do-it-for-me market. About 100 million are going through Quick Lubes and 18 million through Valvoline Instant Oil Change. We believe our market opportunity is not just growing our share of Quick Lubes. We believe the opportunity is much bigger than that, and that's in the total do-it-for-me market. And as I hand it over to Tony Puckett, our President of Valvoline Instant Oil Change, he'll help you understand how we've built this competitive advantage and why we see that larger market to be the real opportunity for Valvoline. Tony?

Thank you, Sam. So Sam has done a great job of laying out the Quick Lubes' role within overall Valvoline. And we really embrace the challenge that's ahead of us and the opportunity that we have to continue to grow the business. If you think about the results, and we do think about that a lot and we seek to continue those streaks of 13-plus years of same-store sales and the 8% over the last 5, what I'm here to do, and my goal for my time today with you, is to really talk about how we're doing it. What are the platforms that are enabling us to continue to drive those same-store sales? And do we believe that we're going to be able to continue that growth? And absolutely, we believe that we will. But it all starts with our promise. So when we talk about our promise, it's a promise to our customer. This is our customer promise that unites all of our Quick Lubes stores and operators across our system, company and franchise, where we promise them to be the quick, easy and trusted way for them to avoid costly and inconvenient breakdowns. It sounds real simple but it's fundamentally how we think about everything. It's how we design our stores. It's how we design our process. It's important in how we build our technology, our marketing and how we engage and execute with our superior teams. So this customer promise, you'll hear me talk about quick, easy and trusted. This is what's differentiating our model and this is how we're winning. We think we have built clear competitive advantage. Sam mentioned several years ago, we weren't able to grow our company stores. Mixed blessing there because not having the capital to build stores, we focused on our game. We focused on our model. We focused on improving our tools. We have proprietary technology, that we built, our team support. Our SuperPro process is how we do everything. It's how we schedule labor, how we take inventory, how we execute, how we engage with the customer. Every component of our experience is scripted, and then we put a smile on it and a personality in our service centers. We believe we have best-in-class marketing within our space. It's highly targeted and highly efficient. You're not going to see us on a Super Bowl ad, but you should know that our marketing is working really hard for us, and we can read it and measure it and get a return on it. And last but not least, and probably most importantly, the foundation of our business model is our teams. We believe that we have superior talent that is allowing us to execute at a higher level, and that's why you see the consistency in our performance. So Sam and I were talking about, how do we bring this group into our experience? So how many here own a car? Okay, that's maybe 30%, 40%. Of those that you own a car, how many of you have been to Valvoline Instant Oil Change? Okay, that's several fewer. So here's the opportunity, right, is I need all of you to be able to raise your hand. And that's the opportunity, I think, that's ahead of us. We want to introduce you to our model. And so today, what we're doing is going to run a video in which we shot a few weeks ago down in one of our brand-new stores in Houston, Texas, where you can experience what it's going to be like when you do have an opportunity to visit us. And if you would, please roll that video. [Presentation]

So that may be the next best thing. You get to see what it should feel like. But what do you think? Do you think that was a quick, easy and trusted way for customers to maintain their vehicles, to do their preventive maintenance? That's what we're seeking to do. And that's the type of experience you should see at any of our service centers, whether it's company or franchise, across the country. Austina, who is our customer service adviser, she takes the customer through the process seamlessly. And what she has behind her is the technology and the process that's working hand-in-glove to make it easy for our customers. Most of our customers, they don't know what's under the hood. They certainly don't choose to work on their own vehicles. And so our job is to educate them. We have OEM recommendations and we have their data, so we're able to provide specification based on mileage as to what that vehicle needs. So it doesn't matter what type of car you drive, we're going to have the information on it. We're going to be able to service it. So that's what's unique about us is when you come into our service centers, we're ready. Our teams, as you noticed, they keep the customer in the car. We want you to be part of the experience. That's a very unique -- even in our own industry, that's unique to do. Why do we do that? Well, we want to be transparent. The automotive industry doesn't always have the best reputation, and for Valvoline Instant Oil Change, we want the customer to be involved throughout the entire process. We want them to see what we're doing. We want to share with them the services they need or are recommended by the OEM, and we want to show them what we're doing throughout the process. That's building trust with our customers, and it's fundamental to how we're strengthening our business. We also collect data from our customers and this is powerful. We scan in the vehicle information. We know the household and where you live. And so this really is capable -- it helps us, our capabilities, around how we market to customers. And also, as we learn about the customers that we have and our most loyal customers, we use that information then to target new customers and new households that will look like our most loyal customers. So again, our marketing is going to be very efficient based on what we learn. And I think, most importantly, this is an education process. We look at our team members as advisers, not sellers. We don't want them selling. We want them to execute our process with a smile, take care of that customer, earn their loyalty to come back. And when we do that, we're going to win and the customer wins. In this particular shot, this is another example of a technology that we have. So you saw our point of service, again, the proprietary technology we use to really run the entire experience. We just put this technology in our stores, which is called our CarCam system. This is what allows the customer to be part of the experience and see it all. It also is capturing service times and wait times, which is one of the fundamental propositions of quick, easy, trusted. When your name is instant, you're expected to be fast. And when you aren't, you get punished. When you look at this graph here, our customer satisfaction scores, our top box scores are really, really strong when the customer doesn't have to wait. So you notice our service center, right? Roll-up doors, pits, we're positioned like a pit crew when you come in to get you in and out quickly because that's why you're choosing us. You value your time and we want to get you back on the road. When your wait time is long, you're less satisfied and less likely to return. So how are we thinking about that? Well, we're leveraging this technology. You noticed in the video multiple times in which our team members and the customer are seeing their actual service time. We want that high awareness to create a high sense of urgency with our teams so that we're working on your vehicle quickly and together so that we can get you in and out. Just recently, we have been able to move this data now to a new VIOC app that was created in the last year. This app then post actual wait times. So our customers then, our existing or new customers that download the app, would be able to see, in a particular market that they're in, at this point just our company markets, what are the actual wait times in those service centers. You click on a specific store that has 0 wait time, you also can see our reviews. Reviews are becoming more and more important in any purchase decision. No different for us. We capture over 340,000 surveys a year across our system and we post every single one of them. And we do that, again, because we want to be transparent with our customers. We want those that are researching us to see what to expect and we're proud of what those results are. And today, they're 4.6 stars out of 5. And we're certainly not happy with that. We'd like to see that number go up. But you see our trust scores, I was talking about earlier, quick, easy, trusted, we're able to grow those trust scores, and this is a very important component of how we're creating retention and loyalty at Valvoline Instant Oil Change. So as we're getting new customers and keeping them, we're building our base. Sam mentioned our oil changes per day continuing to grow. This is fundamental to the strength of the business model and something that we measure in tests. Our marketing. I'll talk about best-in-class marketing. We're constantly learning, we're testing, we're proving, and then we're delivering those proven platforms to our franchisees so that they can implement them and invest and get a great return on that investment, 2x in the same year. When you look at this revenue growth that we've had over the last 5 years on a store basis, from 2015 to 2019, we've grown almost $300,000 of incremental revenue per store. That's powerful when you consider what our fixed costs are. Our marketing spend has increased, but the reason I wanted to share this with you is because when we increase our marketing, we know what we're going to get. And when we have platforms that can deliver this type of return, we're going to continue to invest. Sam mentioned this earlier, what is the opportunity? This is what gets me excited every day. We're just scratching the surface. When we talk about bringing in new customers through our acquisition platforms, where have they come from? So we ask. And over the last 12 months, this is where they've come from. Yes, we're getting our fair share from other quick lubes and we enjoy that. I like taking customers from our competitors. But beyond that, 2/3 of growth of our new customers is coming from other channels: car leaderships, tire repair centers and even DIYers. So as you think about the migration, people aging out of DIY and crawling another vehicle, not wanting to do that anymore, we give them a great solution to come, make it easy for them and allow them to transition to Valvoline Instant Oil Change. I want to finish same-store sales platforms with our talent. We certainly believe that we have superior talent. Our teams are where all of it comes together. This is the execution, in our service centers, how well we execute our process, and we're highly selective in who we select to be on the Valvoline team. I want you to know the team members that join us, when we see the surveys, they are so proud to be part of Valvoline. They're so proud to wear that brand on their chest and that red, white and blue. And they are fastly becoming what Valvoline is known for, the service and the product. And that's really exciting to us. We invest in our team members. We tell them, "You came here for a job, we're going to create a career." We invest in their training. We help them through their certifications and their promotions. And they're in a position to be a service center manager in 18 to 24 months. That's pretty powerful in a retail setting, and we retain them. Our leadership, from Vice President all the way down to service center manager, 90% of them have come from our own system. We've homegrown them. This also is powerful as we consider growing more stores quickly. We have the bench strength to do it. And now I'll transition to store units. So in 2015, we had 942 stores, our franchisees were growing, as Sam said. Company stores had not grown, we didn't have the capital. By 2019 though, we've grown over 440 stores, 47% growth and we moved into Canada. And so we've gained momentum. We began to build our pipeline from ground-ups, which we didn't have in 2015. We began to be aggressive in acquisitions, and we made several, and we continued to make several acquisitions. And we moved into Canada and -- with Great Canadian Oil Change, which really helped us go into a new market with a new opportunity. As we think about where we're going, based on our guidance, that would have us around 1,700 stores by 2022. And we're obviously challenged by that, excited about it, but we're confident in delivering that roughly 100 stores across VIOC a year between our company and franchise. But here's what I want to leave you with, as we've taken our analytics tools and looked at the households in and around each of our stores, the stores that we'll have by 2022, the households that are available to us and the stores that we'll have would only have us having an opportunity of 13.5% of the 121 million households in the United States, another 12 million in Canada. So when we're asked, "Tony, how long do you think the runway is?", this is what I'm sharing with them. This is only the beginning. So we're excited about our opportunity. We're confident about our ability to continue to grow same-store sales. And at this point, I want to turn it over to Mary, our CFO, to talk about how Quick Lubes is impacting the results of Valvoline.

Thanks, Tony. Good afternoon, everyone. I first want to provide you with Quick Lubes' financial performance information -- sorry about that. Quick Lubes' financial performance information to complete our Quick Lubes discussion and then highlight our historical corporate performance and shareholder value creation road map. Over the past 5 years, we've almost doubled our earnings from our Quick Lubes business, driven by 3 key drivers of top and bottom line growth. These drivers exist in both our more than 500 company-owned stores as well as our almost 900 franchise stores. The first is same-store sales growth in our existing store base and operating leverage that comes with that growth. Second is earnings growth from newly acquired stores and third is earnings growth from newly constructed stores. We started opening newly constructed stores in 2018, and these stores will start driving meaningful profit contribution over the next couple of years. The first key driver of top and bottom line growth is same-store sales growth and the related operating leverage that comes from that growth. Of the almost 270 Valvoline Instant Oil Change company-owned stores that were opened in fiscal 2015, revenue growth has grown by 35% over the past 4 years, an average of same-store sales growth of almost 8%. Four-wall store-level EBITDA margin expanded by almost 500 basis points over that time frame, with operating leverage gain from the throughput increases driving more than $40 million of EBITDA improvement. We expect same-store sales growth to continue in the 6% to 8% range, continuing to drive both leverage and earnings growth going forward. Second, we have invested free cash flow to acquire new stores over the past 5 years. Those acquisitions generated a cumulative $47 million of incremental EBITDA in fiscal 2019. We've mapped out the independent Quick Lube operators and identified almost 1,500 targeted independent operators using a highly quantitative, predictive real estate model. We have a team dedicated to identifying, negotiating and closing these transactions and have -- which has resulted in a very strong pipeline of acquisition opportunities. And we expect continued earnings growth of newly acquired stores as we consolidated what is a highly fragmented operating market. While growth from same-store sales and acquisitions have been significant, what I'm most excited about are the benefits from our newly constructed stores that have not yet kicked in. We started opening newly constructed stores in late 2018, and we'll start seeing meaningful profit contribution from these stores in the next couple of years. What is not fully appreciated in our model is the future opportunities these stores present as we expect the cumulative contribution to grow to $30-plus million annually by fiscal year 2022 and continue to grow from there as we open more newly constructed company-owned stores going forward. This is going to be a major driver of new profitability growth as we expect to open more than 50 new company-owned stores per year starting in 2021 and beyond. We also continue to see profit growth from our franchise store network, including same-store sales growth and franchisee acquisitions as well as newly constructed stores, adding 30 to 40 new stores in our franchise network annually. We have a proven model with significant competitive advantages that we believe will drive both top and bottom line growth well into the future. Turning to total company performance. We expect revenues of an estimated $2.5 billion in the current fiscal year, up from $1.9 billion in fiscal 2016. While we've had some challenges in our Core North America business, we still delivered solid EBITDA growth over the past 5 years. As Core North America business stabilizes, and with the growth driver in our Quick Lube business, we expect to accelerate profit growth going forward. Valvoline represents a compelling value creation opportunity. Our first priority is organic earnings growth. We are accomplishing this by investing in our high-growth Quick Lubes segment as well as strategic global supply chain investments. We expect this to result in mid-single-digit top line growth, 6% to 8% EBITDA growth and high single-digit EPS growth. Our next capital allocation priority is inorganic growth, primarily through bolt-on acquisitions. Our dividend is a priority in our capital allocation waterfall. We target a 2% dividend yield and expect it to grow in line with our earnings moving forward. Finally, we consider share repurchases. We focus on managing our balance sheet to maintain a solid BB credit rating, and we'll opportunistically return capital to shareholders via share repurchases by using our balance sheet while maintaining a 2.5 to 3x leverage ratio. Combined, we expect this approach to create compelling shareholder value going forward. I'd like to turn things back over to Sam to close. Sam?

All right. Thanks, Mary. All right. So the key components of our model look like this. We're going to continue with our operational excellence. That's driving excellent performance and profit growth for us. But the multiplier for us is vertical integration. The fact that our products are going through our stores, these controlled outlets, it multiplies our returns. When we make an investment in an acquisition or investment in new stores, our franchise model benefits from having the vertical integration for us. That's coolants, it's lubricants, it's filters. It's our new battery -- Valvoline battery program. It's a big multiplier. The faster store growth is obviously going to multiply our profits, too. And with that, it goes beyond profit growth multiplying. It's also multiplying the convenience to our customers because this business is really all about the customer experience, and that's what we're so focused on. We think the market is coming to us as demand for convenience and what we offer at Valvoline is unique in the marketplace. We see the customer multiple times during the year. Other automotive aftermarket providers might see the customer every 4 or 5 years when they need new brakes or need new tires. But Valvoline gets to develop that relationship in person and leverage our technology and our data to build that relationship. Our plan for the future is to own the relationship with the customer, with that car owner. And I think this gives us tremendous leverage and opportunity as we think about the future and changing technology. Certainly, we're going to see more EVs on the road in the future, but Valvoline, with our retail outlets, will be positioned to service those cars. So no matter how they're powered, Valvoline can benefit from having a strong, customer-focused, growing retail operations. You see what it's doing to the mix. We shared what happened between '16 and '19, but when you start to project forward and what that looks like moving forward, it's going to be over 50% of our profitability over the next few years. And that's not because we're going to shrink Core North America. No, we're focused on stabilizing the Core North American business. And as I mentioned earlier, growing the International business is a nice, long-term opportunity for us. But the growth that we have in front of us in the Quick Lube business certainly is going to help shape our portfolio. And you see what that looks like in the forecast here. The benefits, again, are more predictability of our business, greater control, more pricing power and certainly more growth opportunity. So you've learned a few things about Valvoline today. Valvoline certainly is a great products company. I mean, we've built our business over the last 150-plus years off of great, high-quality products. We're trusted. But more and more, particularly in those markets where we have stores, when you ask the consumer what does Valvoline mean to them, it's going to be all about service, that we offer great service consistently across all of our stores. That experience is so important. And then secondly, this is a high-return, strong cash-generating business and it's one that performs across economic cycles. So certainly, we benefit when there's more vehicles on the road and more heavy-duty equipment in the marketplace. But we're also positioned when market slows, those engines, those cars, they still need to be serviced. And so our business tends to be pretty stable in terms of the demand for our products and for our services. As far as the retail opportunity, I think we've made that very clear today and where we're going with it. But it's a global opportunity, too, particularly in a place like China. This past year, we've opened up 10 stores in China with a joint venture partner, piloting an urban Quick Lube-type model, and we're encouraged by some of the early learnings there. And then finally, I mean, obviously, the Quick Lube business is service-driven, but this service-driven approach is something that we're bringing to all channels of business, whether it's our installer business, our heavy-duty business, the service component is becoming more and more important. It's how Valvoline distinguishes ourself, our product lineup from our competitors. And it's becoming a big part of how we do business and our business model moving forward. It's changing fast. I want to close with this last slide, which compares Valvoline to some of the other presenters here at CAGNY. And what we did here is not just summarize all the presenters, but we took the top quartile stores -- the top quartile companies as how they're valued in terms of EBITDA multiple. And when you take a look at their growth profiles and Valvoline's profile, I think Valvoline and the strength of our brand belongs in this group. And of course, there is one metric that stands out that we're underperforming on, but I think that's because, again, our story is relatively new and investors have yet to fully appreciate where we're going with this business and the growth opportunity that's in front of us. But that's something that we're focused on, getting the message out as we continue to build a great business into the future. So I hope you've learned something new today about the Valvoline business and where we're headed with this business. We're certainly excited about our future. As you leave today, know that we've got a gift for you that is not going to cost you any calories, and you're not going to have to pay to ship at home and your kids are going to love it. So take a look for it on the way out. But I think now we've got a few minutes to close with Q&A. Olivia?

Olivia Tong, Bank of America. You talked about growing about 50 stores annually. Can you do more than that? Why would you? Why wouldn't you? And then if you could just talk a little bit about the M&A environment in terms of potentially acquiring new stores that way as well.

Yes, definitely. So the 50 stores that Olivia is mentioning is our target for new ground-up stores. And you have to recall that we're starting from ground zero, really, where we hadn't had any in the pipeline. So we started to open up those new stores in the latter half of 2018, accelerating into 2019. And then in 2020, '21, we're moving into the 35, 45 and we think 50-plus range. So we're growing into it. Would we like to build more than 50 stores a year? Absolutely. And so we're -- that's a topic of a lot of conversation as we're building our capabilities in-house. But the opportunity for store growth certainly goes beyond that. I think Mary mentioned in her presentation that there's roughly 1,500 independent Quick Lube locations out there that, based on the real estate, could be very good fits for Valvoline. And we think, of course, with our business model, we can improve those operations further. So we're going to work hard on acquisitions. We've been successful in consistently making high-quality acquisitions, particularly some of the regional acquisitions that have added nicely to the business. We see continued opportunity there, but we're also going to have to get good and efficient at making the small 1-, 2-, 3-, 4-, 5-store type acquisitions, too. Our target that we shared is adding at least 100 stores per year over the next few years.

And then just on the weather. More recently, I don't want to concentrate on -- too much on short term, but it's been a fairly uneventful winter. So clearly, the auto parts retailers have seen some challenges as far as things just aren't breaking down as much. How does that impact you, if at all?

Yes, and that's a benefit of our model in that weather is not a factor for us. We're in preventive maintenance so we're not repairing cars. So parts breakage is not a concern for us. The only way weather can impact us is, in the short term, if weather is extremely bad in a certain region, then certainly people aren't driving. And so you just get a little bit of delayed maintenance there, and we tend to get real busy after the storm. So we have had quarters in the past where maybe it's affected us by 100 basis points in the comp in terms of our sales, and certainly can affect our DIY retail business somewhat, too, but just -- weather is not a major factor for us. Jason?