Valvoline Inc (VVV) 2018 Q1 法說會逐字稿

Good morning. My name is Casey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2018 Earnings Conference Call. (Operator Instructions) Sean Cornett, Director of Investor Relations, you may begin your conference.

Thanks, Casey. Good morning, and welcome to Valvoline's First Quarter Fiscal 2018 Conference Call and Webcast. Valvoline released results for the quarter ended December 31, 2017, at approximately 5:00 p.m. Eastern Time yesterday, February 7, and this presentation and remarks should be viewed in conjunction with that earnings release, a copy of which is available on our Investor Relations website at investors.valvoline.com.

These results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. A copy of the news release has been furnished to the SEC on a Form 8-K. With me on the call today are Valvoline's Chief Executive Officer, Sam Mitchell; and Mary Meixelsperger, Chief Financial Officer.

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

Valvoline assumes no obligation to update any forward-looking statements.

In this presentation and in our remarks, we will be discussing our results on an adjusted basis. Adjusted results exclude key items which are unusual, nonoperational or restructuring in nature. We believe this approach enhances understanding of our ongoing business. A reconciliation of our adjusted results to amounts reported under GAAP and a discussion of management's use of non-GAAP measures was included in our earnings release.

As you can see on Slide 3, Valvoline delivered reported operating income of $88 million in Q1 and a net loss of $10 million or $0.05 per share.

Our reported net loss was driven by the estimated impact of recently enacted U.S. Tax Reform. There are a few items related to pension that we want to call your attention to.

First, is pension and OPEB income. Valvoline has early adopted new accounting guidance that reclassifies pension and OPEB income as nonoperating. As a result, our adjusted EBITDA and adjusted EPS now exclude pension and OPEB income. Also related to pension is interest expense, which is higher this year than it was in the prior-year period.

The borrower-to-fund transaction that we executed in late fiscal 2017 impacted our debt and related interest, adding approximately $4 million of incremental expense in the current quarter.

Key items which are excluded from our reported results were primarily due to the impact of Tax Reform.

In Q1, the implementation of Tax Reform led to a one-time $75 million reduction in net income.

$71 million was related to the remeasurement of our deferred tax assets and the deemed repatriation of foreign earnings. An additional net impact of $4 million was related to the Tax Matters Agreement with Ashland. Pension and OPEB pretax income was $10 million in Q1 this year compared to $26 million last year, including remeasurements. Separation costs were $2 million in the current quarter and $6 million in the prior-year period.

Now, if you move to Slide 4, let me turn things over to Sam to cover more details of our results. Sam?

Thanks, John, and good morning, everyone. Q1 was a good start to fiscal 2018. Our adjusted EBITDA of $108 million was in line with our expectations, despite modestly higher cost from the hurricanes late last year and from the launch of our new Easy Pour Bottle.

Our unit margins improved sequentially in most areas, as we expected. We anticipate further improvements to unit margins in Q2. Quick Lubes performance was excellent and looks even better coming off the strong quarter we had in Q1 last year. We also had premium mix gains in every segment, and overall volume growth.

Finally in Q1, we returned cash to shareholders. We raised our dividend by more than 50% and repurchased 1.6 million shares. In addition, we established a new $300 million share repurchase authorization. The business is healthy and we are on track to meet our goals for the year.

Let's take a closer look at each segment's results, starting with Core North America on Slide 5. As you can see, branded premium mix was another good story in Q1 moving up 400 basis points to 47.8%. We're maintaining our momentum in this important measure for the business. Branded volume was up slightly, but due to changes in promotional timing, our nonbranded volume decreased year-over-year, leading to the modest volume decline for the segment overall.

As we expected, unit margins improved sequentially. We anticipate further improvements in Q2. Hurricane impacts on raw material cost and transition cost for our new packaging were higher than anticipated and drove the year-over-year decline in unit margins in Q1.

These cost increases and our planned investments in SG&A were the primary drivers for the decline in segment EBITDA versus last year. The recent trend in crude prices is driving inflation in base oil. As we look out to Q3, we expect to see the impact of higher raw material costs. We continue to take appropriate pricing actions and expect some modest price cost lag impacts in the second half of the year.

On Slide 6, you can see that our focus on innovation continues. Our game-changing new Easy Pour packaging design is now available across our synthetic product line in more than 18,000 DIY locations and is expected to be available across our full lineup of motor oil products later this spring.

Shifting to product innovation, we've invested in innovation to address performance issues in newer cars. Fuel efficiency and emission standards are driving new engine technologies, like turbocharging and gas direct injection. However, these new designs can lead to increased carbon deposits and poor engine performance.

Our new EasyGDI fuel system products are designed to clean even severe cases of carbon buildup that can lead to more serious engine problems.

Modern Engine premium synthetic motor oil, which we just launched in our new Easy Pour Bottle, helps prevent carbon buildup from forming. Over time, we expect both of these new products will help grow our branded volume, drive share gains and improve mix in both DIY and DIFM channels.

Moving to Quick Lube results for Q1. You can see on Slide 7 that the segment delivered strong systemwide same-store sales growth of 7.9% in Valvoline Instant Oil Change.

Company owned stores were up 8.2% and franchise stores up 7.7%. These results are even more impressive as they demonstrate growth over an outstanding quarter last year when same-store sales grew 9% systemwide.

Same-store sales growth was driven by gains in transactions and in average ticket. The increase in transactions is due to the performance of our marketing platforms. We continue to see benefits from our new advertising campaign launched last year. We also increased prices in Q1, which drove our average ticket improvement. Total segment sales and EBITDA growth were also driven by acquisitions, including the recent franchise system, which closed in early October.

We're also benefiting from new stores; systemwide, we've added 63 new stores since Q1 last year, including 12 during the quarter. We are on track to add more than 50 new stores systemwide for the year.

Volume growth continued in Q1 for our International segment. Slide 8 shows that our reported volume was up 4% year-over-year and up 9%, including our unconsolidated joint ventures.

Volume momentum in Europe is continuing. We had a strong quarter for volume across Latin America, where we're building on the success of our ongoing channel development. We also added new distributors across the Middle East and Africa and expect these additions to help the region contribute to our volume growth over time. Our joint ventures with Cummins had another record quarter of volume and made strong contributions to our overall results. Unit margins were impacted by higher supply chain and raw material cost in certain markets, particularly in Asia, as well as a lower contribution from higher-margin geographies. We are adjusting pricing to pass these raw material cost increases through and anticipate unit margins to improve in Q2. Low unit margins and planned increases in SG&A drove the decline in EBITDA. Beyond our segment results, we also introduced a new share repurchase authorization that is discussed on the next slide. The new authorization allows us to repurchase up to $300 million in Valvoline common stock through fiscal 2020. We expect to begin repurchases under this authorization, once the current one is complete towards the end of Q2.

The strength and stability of our business model, combined with our strong cash flow conversion, enables us to invest in growth opportunities while returning capital to shareholders.

Our first priority is to invest back into the business to capture the growth opportunities across the segments. We are investing in our digital infrastructure and strengthening our international supply chain. We expect both of these will drive growth opportunities and improved efficiency. And of course, we're adding new Valvoline Instant Oil Change company stores as we penetrate new markets. We are also going to continue to pursue acquisitions with a focus on Quick Lubes. We'll be looking opportunistic and -- we'll be opportunistic and looking at other projects. We're committed to returning capital to shareholders, which we've demonstrated over the growth and the dividend and the additional share repurchase authorization. Over time, we are targeting to return 45% to 60% of our operating cash flow to shareholders through dividends and share repurchases. We have a phrase at Valvoline that describes the way we work with customers, franchisees and our business partners, hands-on expertise. Our team's hands-on expertise has led us some industry recognition that I'd like to highlight. We were named one of America's safest companies by EHS Today. Safety is one of our core values and we're proud to be recognized for our results.

The Valvoline Instant Oil Change franchise system was recognized as the Top Ranking Quick Lube franchise in Entrepreneur Magazine. VIOC's systemwide focus on talent development was also recognized with the top honor. At Valvoline, it all starts with our people, awards like this prove it. We've also recently been recognized by major customers and partners in the U.S, China and Latin America, including awards from both O'Reilly Auto Parts and AutoZone. These are great achievements, and strong relationships with retailers, OEMs and distributors, are key to our growth strategies. Successes like these demonstrate the health of the business and our progress in building a great company. With that, let me pass it over to Mary for a deeper look at our Q1 financial results.

Thanks, Sam. Our adjusted results for fiscal Q1 are summarized on Slide 11.

Sales were up 11% and volume growth was 2%. Adjusted EBITDA was $108 million and adjusted EPS was $0.29. Both of these items are now -- both of these items now exclude pension and OPEB income. Adjusted EBITDA decreased $1 million versus prior year with favorable volume mix, offset by planned increases in SG&A.

As we said last quarter, we expect full year SG&A to grow roughly in the high single-digit range versus last year. SG&A grew at a higher rate in Q1 due to the full year effect of our public company infrastructure costs, which phased in during the year in 2017.

The majority of our remaining SG&A increases are related to investments that will drive both our top and bottom lines, including sales and marketing. Marketing is in support of our product and packaging launches in DIY and incremental advertising is related to our ad campaign in VIOC.

Salesforce investment is primarily in International to drive both top line volume and sales. Overall, we are making smart, prudent investments in support of our growth plans and over time, we expect to be able to leverage these investments in SG&A.

As outlined on Slide 12, we expect to be a net beneficiary of Tax Reform. In fiscal 2018, we expect to see a federal tax rate of 24.5%. This is a blend of 3 quarters at the new lower rate of 21% and one quarter at the prior 35% rate.

We anticipate Tax Reform will result in a consolidated adjusted effective tax rate of 27% to 28% for fiscal 2018, and 25% to 26% in 2019 and beyond.

The higher effective tax rate in Q1 was driven by the one-time charge associated with Tax Reform. Our Q1 adjusted effective tax rate was 28.9%, benefiting from the blended rate reduction I just discussed.

The lower tax rates reduce our cash taxes. Additionally, we expect to benefit from the 100% expensing of certain capital expenditures. There is no material incremental impact to cash flow this year from Tax Reform, as the benefits of lower rates are offset by a reduction in the value of the NOL generated by the pension funding we executed in 2017. Lower tax rates also benefit EPS and we saw a $0.02 benefit to adjusted EPS in Q1. The net impact of tax reform to our Q1 results is provisional and may be refined in the future as further regulations and additional guidance become available.

Turning to corporate items on Slide 13. There are a few things I'd like to point out. Cash flow from operating activities was $20 million. The year-over-year decline was driven by the timing of settlements from working capital, including separation related items in the prior year. We expect these working capital timing items to reverse over the balance of the year. Capital expense was $14 million and free cash flow generation was $6 million. During the quarter, we also closed on the franchise system acquisition in VIOC at 56 stores.

Now turning to the next slide, I'd like to talk about our updated expectations for 2018. We are raising our adjusted EPS estimates by about 8% to $1.30 to $1.38 per share due primarily to the benefits of Tax Reform. We are raising same-store sales growth to 5% to 7% based on our performance in Q1 and we're also raising our revenue growth guidance to 10% to 12%, reflecting the better same-store sales and pass-through pricing. We are maintaining our adjusted EBITDA guidance at $480 million to $500 million.

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

Thanks, Mary. With the performance we had in Q1, we're on track to meet our goals for 2018. In Core North America, branded volume was solid in our historically slowest quarter.

We improved premium mix, made sequential progress on unit margins and launched innovative new products that give us confidence in the future. In Quick Lubes, we had a strong start to same-store sales growth and added 12 new stores to the system. In International, we continued to grow volume and expect to see improved unit margins in Q2.

Our strong business model, combined with our growing dividend and new share repurchase authorization is a compelling formula for driving total shareholder returns. And with that, I'll hand it over to Sean to open the line for Q&A.

Thanks, Sam. (Operator Instructions) With that, Casey, please open the line.

(Operator Instructions) Your first question comes from Stephanie Benjamin with SunTrust.

I just have a question on really just the higher raw material costs you saw during the quarter? And then just your commodity outlook for the year? I know, Sam, you mentioned that you'll see some price lag effect in the second half, but I was just looking to get more color on that? And what we can expect on a quarterly basis going forward?

In the first quarter, we had, as noted, higher raw material costs that impacted us from the hurricane impact and also from the new packaging that we're launching in the DIY channels. And so we felt the impact of that in our unit margins in Core North America were modestly lower than our expectations going into the quarter. Coming out of it, we're in good shape and that's why we're projecting that our Q2 unit margins will improve. That said, we are in a period of inflation, where certainly we've seen crude make a significant move up into the mid-60s, when you look at WTI and that, of course, influences where base oil prices will be and there have been announced base oil increases and those increases will begin to flow through to our P&L, primarily in Q3.

Fortunately, we've been able to move prices and announce price increases and begin to implement those price increases that will take hold in Q2 and into Q3. And so we feel we'll be in good shape with, what I'd consider to be a very manageable price cost lag effect.

Your next question comes from Simeon Gutman with Morgan Stanley.

Can you just first remind us the mix of group 2 versus group 3, just the percent of input? And can you talk about, are there any structural changes that are happening in the refining area that could have an implication, good or bad, on input cost meaning is there just more capacity chasing either of those groups something different than where we were, let's say, a year ago?

Okay. Yes, in terms of the mix of group 2s and group 3s, group 2 is still our largest input, group 3s are used in the growing synthetic segment. And so group 3s are becoming more and more important to our mix, but group 2s are -- I haven't looked at the mix recently, but well over 2/3 of the overall mix. And in terms of, you know, base oil production, it's -- there's been a lot of capacity additions in group 2s. So the market continues to be fairly long there and group 3 production continues to increase -- capacity increases, as the shift to synthetics happen. We see that as more of a balance market.

Okay. And then my second question is more on guidance. Look, first quarter was more or less consistent with your expectations, but the absolute EBITDA did decline and the midpoint of the guidance is for midish- to high-single digits for the remainder of the year, which means it's got to be above average for that and I guess that was all contemplated, but what sort of changes in the model? And what gives you confidence that those run rates are achievable?

Yes. Most importantly is our ability to adjust prices to protect our unit margins. So when you look at our results in Q1 and also when we look at the balance of our fiscal year, the initiatives that we have in place to continue to drive solid volume performance, branded volume performance in Core North America, certainly, in our Quick Lube business and also the growth that we see in the international regions. We feel really good about just the core strength of the business and the initiatives we have in place to drive that growth. So what's key for us is, we've got to protect those unit margins, and we've got to be able to implement those price increases to offset the base oil increases that will be flowing through later this year. And based on the work that we've been doing to work those price increases through to our customer base, really in all segments, we feel very good about our ability to protect those margins. So when you put the 2 together, that gives us confidence in the EBITDA performance that we're projecting for the balance of the year. So -- but certainly this is a step up versus where we were in Q1. Q1 is lower seasonally versus the rest of the quarters. It's really in the balance of the year where volume picks up is at a higher level and EBITDA picks up and that's been consistent over the years for quite some time.

Your next question comes from Carolina Jolly with Gabelli.

Just to start, I guess, can you kind of talk about the North American segment? And anything you're seeing within that end market? I know that the big 4 distributors are large customers of yours. Are you seeing anything there? And given some of their recent results, do you see any issues with passing price through in that segment?

Sure. So, yes, when we focus on the DIY business in Core North America, so a significant contributor to our performance in Core North America, those relationships with the large retail accounts are very important to us and we have really strong merchandising plans in place for 2018.

So I feel very good about the distribution of our products, how they'll be promoted and our ability to pass new pricing has a lot to do with the strength of the brand, the strength of those relationships, working with the retailers so that they're taking the appropriate actions that allows them to protect their margins too. And so we're well into the implementation plans of these price increases and the other positive thing that we are seeing beyond our own actions is that competitors have also announced and are implementing price increases too. So I feel very confident about where we stand in Core North America and certainly with the important DIY business. As I mentioned in the presentation, we've got some exciting growth initiatives too that are in place. This new Easy Pour package is a far superior package to our competitors, with the consumer research that we did behind it indicates that. And the support that we are getting from our retail partners and the enthusiasm that they have for this initiative is quite strong.

Your next question comes from Wendy Nicholson with City Research.

I just wanted to follow-up -- focus the conversation on the International business, where the margins were a little bit weaker, and I think the press release called out sort of a negative mix shift. But I wondered if that was, and I know you're looking for an improvement there, but is that just temporary, was that a sort of something specific to this quarter or is there some sort of underlying shift? So how should we think about the margins in the International segment over the longer-term?

Yes, great question. We do see it as a short-term impact that was within the quarter. Our business in Australia, which is one of our larger mature markets, very profitable for us, had a relatively weak quarter and so that did have a mix impact relative to the strong margins that we have in a mature market versus some of the lower margins that we have in developing markets.

But we look at the plan in Australia, we think they'll be back on track for the balance of the year and then we're seeing some really good growth, continuing to see that in Latin America and China. Our joint ventures, I mentioned too, were quite strong and Europe continues to show some really nice growth too. So I feel very confident about the performance of the international business and our ability to grow.

The other impact that we did call out was that higher raw material costs were flowing through in the International business in our first quarter.

And we'll see the impact of our price increases in our second quarter that we've implemented this quarter. As we're in Q2 now, that will show that unit margin improvement. When we report the Q2 results, we're confident that we'll be in good shape with our margins overall in the International business.

Got it, okay, terrific. And then my second question was on the share repurchase program. That's terrific, thrilled about that. But is there any, and I'm sorry if you made a comment on this and I missed it. It's a busy morning. But just regarding, sort of, your appetite and outlook for acquisition activity, does it still seem that there are opportunities for you to acquire new smaller chains? Does this reflect sort of a shift in capital allocation priority? Or just a reflection of sort of a strong cash flow outlook?

Yes. It does not reflect any change in our confidence and the ability to make some Quick Lube acquisitions that we think will be strong additions to the overall Valvoline Instant Oil Change business. It really reflects the strong cash generation of the business model itself, and so throughout our -- if you look over the last 18 months, we started with the dividend, we increased our dividend. Then last fall, we started with the share repurchase program, we completed that early and now -- or will be completing it on the early side and then we are putting a new share repurchase authorization in place, because we believe that not only can we invest in the business and as I noted, we've got some important capital investments to strengthen our digital infrastructure or supply chain infrastructure. But also making Quick Lube acquisitions, that's all part of our investment for growth, investing in high-return projects. That's first and foremost, always going to be our priority. But even beyond that, this business is going to continue to generate cash beyond those growth needs and that gives us confidence in returning cash to shareholders via a higher dividend, but also then this higher share repurchase authorization.

Your next question comes from Dmitry Silversteyn with Longbow Research.

This is actually Casey filling in Dmitry. On the volume side, was there any, kind of surprises that you saw on the quarter on a geographic basis? Either positive or negative?

No. Really weren't any surprises.

Okay. And then as you look to some of the impact of the price increase in the quarter, is that a little bit slower than the flow-through in the North American business, on the International? Could you give a little more color on that?

The timing of the cost increases can be a little bit different in international markets, and in this case is really the International business that felt those higher cost increases in Q1, whereas some of the increases that we felt in Core North America earlier in fiscal 2017, were covered by price increases there. So this is really kind of a shift where we saw a higher cost in certain markets in the international business that now are resulting in price increases being implemented.

And Casey, there was very little price cost lag in the Core North America business for the quarter. Most of the margin impact that we saw was really caused by those one-time costs associated with the hurricane and bottle launch that Sam mentioned.

Your next question comes from Jeff Zekauskas with JPMorgan.

I understand that you make more -- you have a higher margin on semisynthetics and synthetics than you do on conventional oils and that your mix is moving up. But there have been some industry surveys done that have said that semisynthetic oil change prices have come down about 20% in the course of 2017. Is that true? Are semisynthetic prices down year-over-year? And if they are, why is that?

Yes. So when you talk -- first of all, just talk a little bit about the product lineup. You've got conventional oils, semisynthetic, as you mentioned, we call them the high mileage segments -- predominantly high mileage segment and then the full synthetic segment. And Walmart has been a bit more aggressive on the high mileage segment, where they're pricing it close at shelf or on top of conventional pricing. So they have put pressure on retail prices, as it relates to the high mileage segment. But on the positive note, it's also contributed to good volume growth in that segment too. So the shift that we're seeing to high mileage and then the full synthetic continues to be strong. But it hasn't been -- for us, it's a net positive because of our strong share in the high mileage segment. And that's a segment that we expect to continue to grow, not just in DIY but across all the channels. It's a significant contributor in the installer channels and in Valvoline Instant Oil Change, where it carries much higher margin than the conventional segment. So growth in high mileage segment continues to be a real positive for us and then in addition to that, you've got the growth in the synthetic segment, which continues to be very strong.

And for my follow-up, what's the relative size of your high mileage versus your full synthetic? Which one's bigger, which one's smaller, are they materially different? And for Mary, what's the cash tax benefit, if there is any, in 2019, from the tax changes?

I might have to follow up with the specifics around the split in high mileage versus synthetic, but for us, the high mileage segment is bigger than the synthetic segment right now. And yet you've got faster growth rates in the synthetic segment. So particularly, we have good share data, as it relates to the DIY business and the Do It For Me side of the business. We don't have good share tracking data that helps us understand exactly what's going on competitively.

But we like our trends for both high mileage and full synthetic with the installer, DIFM side. On the DIY side though, that's where we've done a nice job increasing our shares year-over-year. And in particular, we're strongly focused on strengthening our full synthetic market share with some of the growth initiatives that we have in place. I think not only will the new packaging help us, but the launch of Modern Engine is going to help us continue to penetrate the full synthetic segment, first in DIY and then across channels as this new product takes hold.

And Jeff, on your cash tax question in '19, we expect just the rate benefit from the lower effective tax rate to be in the $40 million range, now it's 8% on our profit before tax, 800 basis points. And then we do expect incremental benefits from the 100% expensing provisions of the new law that will diminish over time is that -- that will -- grandfathers, I think in 2022 or 2023. So -- but it's a significant cash tax benefit for us.

Your next question comes from Mike Harrison with Seaport Global Securities.

This is Jacob on for Mike. Just a clarification question. The higher raw material cost associated with the new packaging launch, we assume that was more of the packaging design with the new features and it would cost more than this packaging, and so that's what's causing the uptick in cost. But a previous comment (inaudible) more of a onetime impact? So just trying to figure out if that headwind goes away for the rest of the year or...?

Yes. That's -- it's a good question to ask because there is a -- there are 2 elements of the cost increase, the cost impact of a new package. And the one that we are highlighting is really the temporary cost of making those plant conversions. And so as we convert our lines to the new packaging, there are some logistic challenges with that and in those higher costs of logistics and conversion are what we're reflecting as a negative impact in Q1.

And those begin to subside as we move into full production of the packaging lineup across the line. There is, however, an ongoing higher cost of the new package design that is reflected in our forecast. And yet we believe the higher cost is a very smart investment for us because of the value that it brings to DIY consumer and what it does to strengthen the brand so it's really an investment in marketing in the important DIY channel for us.

And we have no further questions in queue. (Operator Instructions) And you do have a question that has come through from Olivia Tong with Bank of America Merrill Lynch.

Sorry, we're having a little bit technical difficulty here. But I wanted to ask you a little bit about same-store sales, which continues to be pretty strong. But obviously, your outlook didn't really change and still implies a fair amount of deceleration in the back half. So can you talk through the expectation for the deceleration, maybe how you think about driving frequency in a higher gas price environment?

Yes. I mean, first of all, we're really excited about the results that we're seeing in Valvoline Instant Oil Change and the same-store sales performance, particularly that's been driven by continued growth in transactions. So we are continuing to win new customers to the business. And what we're seeing is that while we're attracting new customers, we're also doing a good job retaining new customers too and that's where we're seeing some nice year-over-year comp growth. And so when we look at the sustainability, first of all of same-store sales growth, we're bullish for the future because we continue to learn from our digital marketing campaigns and to sharpen not only the messaging but the delivery and the targeting around those campaigns that help bring in those new customers. With regards to the outlook, I mean, Q2 last year was a relatively weak same-store sales performance so we're going to have a very strong Q2 when it comes to same-store sales growth. As we get into the back half of the year, we did have quite good performance in both Q3 and Q4 in same-store sales performance. So we'll be lapping tougher comps. We did see a really nice pickup when we launched the new digital advertising campaign that took place kind of halfway through Q3. But we'll still see some good solid growth in same-store sales, I believe, in Q3. I think it's really in Q4 where we were in full spin mode on the new campaign and saw excellent results last year that our comps -- that we should expect those to be a bit lower. So that's really the drivers behind why we don't expect to see, say, 8% comps for the whole year. It's that we'd likely see a little bit of deceleration in the back half of the year. But in terms of just strength of the overall business and the ability to continue to win more customers to our store, because of the consistency of execution in the stores, delivering on what consumers are looking for, that quick easy trusted experience. Our company stores, our franchise partners are just doing an excellent job on execution and so we're confident that we've got a great business here that's going to continue to grow for us. First in same-store sales performance, that organic growth, and then on top of that, it's going to be exciting to see some of our first new stores come out of the ground. We are going to see good company store growth in the back half of the year as our new store program takes hold. And as I mentioned earlier in the call, we're continuing to pursue those conversations with regional Quick Lube operators and that continues to present an opportunity for us. The key is developing those relationships and finding those high-quality operators that would be good fits with our system.

And your next question comes from Chris Shaw with Monness, Crespi, Hardt.

I just want to piggyback a little bit on that last question. Historically, have you found that in an inflationary environment, I guess, the duration between oil changes, does that extend it all? Or do customers, typically, are they somewhat insensitive to the actual price of either oil change or motor oil itself?

Yes. We have not seen an impact on oil change intervals based on inflation. It's one of the great things about our business is that demand is really steady and that's because whether the economy is super strong or relatively weak, people are going to take care of their vehicles, their investments, their engines. And so even as gas prices move up, we don't expect a difference in our oil change intervals. The growth in oil change interval tends to be driven more by the shift towards synthetic. But that's at a manageable rate for us and with the higher margins on synthetics, that's a very positive element of our overall business. So the outlook is still very positive. Over the last few years, we've seen increases in miles driven to and that's been a tailwind for the business. It's moderated a little bit this past year where I think the growth rate has been closer to 1% versus 2% in the previous couple of years. But still a positive move.

And then just a quick one on the new packaging on the new bottle. Are you charging a premium for that? Or is that more of just gains in volume and some share as an advantage?

Yes, we are not increasing over prices to support the new bottle. So it's really a marketing investment and another way for us to grow market share in the DIY segment. And I can say, we're bullish on this move for us and really when you think about the Valvoline business and how we're going to drive growth in Core North America, it's going to come from innovations like this, where Valvoline is putting in place a significant competitive advantage in our product, in our packaging, in marketing programs that our partners can use to help drive their business. This is how Valvoline wins in a relatively flat demand environment is that we're going to grow market share and we're going to improve our premium mix.

And there are no further questions at this time. Ladies and gentlemen, thank you very much for joining today. This concludes today's conference call and you may now disconnect.

All right. Thanks everyone.