Valvoline instant oil change reporting a strong beat in its second quarter, seeing systemwide same store sales growth of 8.2%. This company has contended with rising oil prices and a more cautious consumer.

We reported a really strong second quarter growing our top line by 25% while also expanding margins and growing cash flow. Uh we're seeing healthy transaction and ticket growth. Our ticket growth is driven by both the car park evolution to more premium lubricant requirements or recommendations from the OEM as well as non oil change uh services penetration.

Oil prices are of course rising Lori. I'm curious as the CEO here, how you're navigating that. How much can you sort of pass along to the customer before you dent demand?

Yeah, oil prices do affect our material costs, but material costs are not our largest cost um item in our PNL. They make up less than 20% of our sales. um and lubricant being a big piece of that. But to be honest, we have normal hedges in our business. First, we pass on dollar for dollar any lubricant prices to our franchisees and we hedge with waste oil sales. And as base oil prices go up, waste oil prices go up, so we get a natural hedge. Um for every dollar of base old increase, which is a pretty big increase, um we only need to pass on a 50 cent price increase to our customers, which on over a dollar ticket is pretty minimal. Q2 we didn't see any increases in our lubricant cost, uh but Q3 we've started and we and some of our franchisees have already made some pricing adjustments to ensure that um we pass that through to consumers.

You know, oil change is, Lori, it's something you got to do, but you you can delay it, right? especially if you're if you're feeling maybe a bit anxious about the economy or or or your or your finances. Are you seeing any evidence of that lower in your business consumers sort of delaying maintenance?

Yeah, this is considered a very non-discretionary purchase. Uh preventative maintenance is a lot cheaper to spend money on than the repairs of a lack of matrix maintenance or an upgrade of a vehicle. In our business, we have not seen any trade down, um, that means taking a lesser product than their car would recommend. um and we don't see people deferring the service. Part of that is people need to keep their vehicles longer, um in order to make their budgets work. And so paying to maintain the car they have is the choice that they're making and I think they'll continue to make.

So bottom line, Lori, just how how would you sort of broadly characterize your customer right now, the consumer? I mean, resilient, stable? What do you think?

Our customer is very resilient. Again, I think the trade down is around avoiding mass, you know, major repairs on their vehicle or having to trade up to a newer vehicle uh with a loan or lease expense that they don't currently have. Um people want a trusted provider, again, they want to be in and out. So when you think about how fragmented the market is, the customer's drive for convenience, the resilient demand and people wanting to take care of this asset, it spells for great growth opportunity for companies like Valvoline.