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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook: strong financial metrics with increased EBITDA and EPS, yet tempered by concerns over declining EBITDA margins and an EPS miss due to higher costs. The Q&A reveals uncertainties surrounding the Breeze acquisition and its impact on margins. While SG&A leverage and store expansion offer positive signals, the lack of specific guidance on key issues tempers optimism. The neutral sentiment reflects balanced positive and negative factors, with no significant catalysts to drive a strong price movement.
System-wide store sales Increased to $3.5 billion, showing a double-digit increase year-over-year. This growth was attributed to the addition of 170 system-wide stores and strong same-store sales growth.
Adjusted EBITDA Achieved double-digit growth year-over-year, despite the impacts of refranchising and investments in technology.
Net sales (Q4) Grew to $454 million, increasing 4% on a reported basis and 10% when adjusted for refranchising impacts. Growth was driven by system-wide same-store sales increase of 6%, with about 1/3 coming from transaction growth.
Net sales (Fiscal Year) Grew 12% year-over-year when adjusted for refranchising impacts, reaching $1.7 billion. System-wide same-store sales grew 6.1%, with transaction growth accounting for just over 1/3 of the comp.
Gross margin rate (Q4) Flat year-over-year at 39.1%, with labor leverage contributing 120 basis points, offset by increased product costs.
Adjusted EBITDA margin (Q4) Increased 20 basis points year-over-year to 28.7%, driven by operating leverage and moderated SG&A growth.
Adjusted EBITDA (Fiscal Year) Increased 11% year-over-year, with adjusted net income increasing 6% and adjusted EPS increasing 8%, despite increased new store depreciation.
Capital expenditures (Fiscal Year) Totaled $259 million, with about 70% allocated to new store additions.
System-wide store sales: Achieved a double-digit increase to $3.5 billion, marking the 19th consecutive year of same-store sales growth.
New store additions: Added 170 system-wide stores, bringing the total to 2,180 across the U.S. and Canada.
Breeze Autocare acquisition: Expected to close on December 1, adding 162 stores after divestitures, with a net purchase price of $593 million.
Franchise market expansion: Refranchised three markets (Denver, Las Vegas, West Texas), leading to a 150% increase in new store additions in these areas.
Fleet business growth: Fleet growth outpaced consumer business growth, with increased collaboration with franchise partners to expand fleet services.
Labor productivity: Implemented Workday forecasting and automated scheduling tools across all U.S. company-owned stores, improving labor efficiency.
Marketing efficiency: Focused on enhancing return on marketing spend through network scale and reach.
SG&A investments: Invested in teams and technology, leading to an 80 basis point increase in SG&A as a percentage of net sales.
Core business focus: Prioritized consistent process execution, store efficiency, marketing ROI, and team member retention.
Network growth strategy: Planned to add 330-360 new stores in fiscal 2026, including the Breeze acquisition.
Leverage management: Targeted a return to a leverage ratio of 4.2x within 18-24 months post-Breeze acquisition.
Adjusted EPS at the low end of guidance: Adjusted EPS came in at the low end of the range at $1.59 per share, indicating potential challenges in meeting profitability expectations.
Increased capital expenditures: Capital expenditures were above the range, driven by the timing and mix of new store additions, which could strain financial resources.
FTC-mandated store divestitures: The Breeze Autocare acquisition required the divestiture of 45 stores to gain FTC approval, reducing the net additions and potentially impacting growth projections.
Increased leverage ratio: The acquisition of Breeze Autocare will increase the leverage ratio to approximately 4.2x, which may heighten financial risk and limit flexibility.
SG&A growth: SG&A as a percentage of net sales increased 80 basis points due to investments in teams and technology, which could pressure margins.
Product cost increases: Gross margin was flat year-over-year due to increased product costs, which could impact profitability if not managed effectively.
Interest expense from acquisition: The Breeze acquisition will result in an additional $0.20 per share impact on adjusted EPS due to increased interest expense, potentially affecting net income.
System-wide same-store sales growth: Expected growth of 4% to 6% in fiscal year 2026.
Overall network growth: Projected addition of 330 to 360 new stores in fiscal year 2026, including the Breeze acquisition.
Sales growth: Anticipated growth of approximately 20% in fiscal year 2026.
EBITDA growth: Expected growth of approximately 15% in fiscal year 2026.
Capital expenditures (CapEx): Planned spending of $250 million to $280 million in fiscal year 2026, including investments in company store growth and the Breeze acquisition.
Adjusted EPS: Projected range of $1.60 to $1.70 per share in fiscal year 2026, representing a 4% growth over the prior year.
Leverage ratio: Expected increase to approximately 4.2x following the Breeze acquisition, with plans to return to the target leverage ratio within 18 to 24 months through EBITDA growth and debt reduction.
Share Repurchase: The company reiterated its capital allocation priorities, which include using share repurchase as a way to return value to shareholders. However, no specific details or figures regarding the share repurchase program were provided in the transcript.
The earnings call indicates stable financial performance with some positive aspects, such as raised EBITDA guidance and strong returns on real estate projects. However, there are concerns about competitive pressures, potential impacts of generic GLP-1s, and unclear management responses on future investments and insurance claims. The Q&A session did not reveal significant new risks but highlighted uncertainties in consumer trends and market competitiveness. Overall, these factors suggest a neutral market reaction, with no significant catalysts for a strong stock price movement in either direction.
The earnings call presents a mixed outlook: strong financial metrics with increased EBITDA and EPS, yet tempered by concerns over declining EBITDA margins and an EPS miss due to higher costs. The Q&A reveals uncertainties surrounding the Breeze acquisition and its impact on margins. While SG&A leverage and store expansion offer positive signals, the lack of specific guidance on key issues tempers optimism. The neutral sentiment reflects balanced positive and negative factors, with no significant catalysts to drive a strong price movement.
The earnings call summary highlights strong financial performance, with an 18% increase in adjusted EPS and an increase in adjusted EBITDA margin. Despite a slower June, July showed improved performance. The Q&A session revealed positive sentiment towards the company's strategies, such as tech investments and store acquisitions, despite some lack of specific details. The overall sentiment is positive, with optimistic guidance and strategic growth plans, suggesting a likely stock price increase in the short term.
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