National Vision Reports 67th Straight Quarter of Same-Store Sales Growth

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DULUTH, Ga.—National Vision Holdings Inc. (NASDAQ: EYE) reported Tuesday that its sales rose 11.9 percent to $387.4 million in the third quarter, which ended Sept. 29. The increase was driven, in part, by a same-store sales increase of 7 percent (6.8 percent on an adjusted basis), which marked the 67th consecutive quarter of positive comparable-store sales growth for National Vision, according to an announcement from the company. Sales in the year-ago quarter totaled $346.1 million. The company also reported net income of $5.8 million in the third quarter (compared with net income of $1.5 million in the year-ago quarter), and said adjusted net income increased 57.7 percent to $9.2 million (compared with $5.8 million) and adjusted EBITDA rose 7.3 percent to $38.8 million (compared with $36.2 million).

The same-store sales gain in the quarter included increases of 8.9 percent and 8.4 percent at the company’s Eyeglass World and America’s Best segments, respectively. Chief executive officer Reade Fahs told analysts on a conference call the same-store increases were primarily driven by gains in customer count rather than average ticket, “which is the way we like it.” He also noted that the company faces a difficult comparison with its fourth-quarter same-store sales comparison (an increase of about 10 percent company wide in 2017’s fourth quarter).

“We are very pleased with our third quarter and year-to-date results,” Fahs said in the announcement. “Our team delivered its 67th consecutive quarter of positive comparable-store sales growth, driven primarily by increases in customer transactions.” He said the company is on track to achieve its 2018 store-opening plans of about 75 new stores.

Fahs also noted the Q3 results reflect ongoing strength of the company’s “differentiated business model and compelling value proposition that continue to resonate with customers.” National Vision said its AC Lens division expanded its contact lens distribution relationship with Walmart in September, which added roughly $3 million to net revenues in Q3. (The new agreement with Walmart marks the first expansion of the company’s overall relationship with the big retailer since 2013, Fahs noted.)

“We continue to strive to deliver on our mission to make quality eye exams and eyewear more affordable for our patients and customers, and our optometrists and associates work hard every day toward making this possible,” he added.

Among the Q3 highlights, the company opened 18 new stores, closed one store and ended the quarter with 1,067 stores. Overall, store count grew 7.1 percent from Sept. 30, 2017, to Sept. 29, 2018. A new state-of-the-art lab in Texas is on track to be operational in the first quarter of next year, executives said on the conference call.

National Vision reported that on Nov. 12 it entered into a new agreement with Essilor of America, which, when effective, extends the term of the company’s contractual arrangement with Essilor from June 1, 2019, until May 31, 2023. Under the agreement, Essilor has the sole and exclusive right to supply certain lenses for eyeglasses to the company.

In an update of its fiscal outlook, National Vision said it expects adjusted same-store sales growth to be at or above the top end of the range that was previously provided, and that its AC Lens business is generating higher net revenue, including the Walmart expanded contact lens distribution relationship, which is estimated to add at least $10 million to 2018 net revenue. Adjusted EBITDA and net income are expected to be near the lower end of the previous range.

In the current fiscal year, National Vision said it expects to incur approximately $4 million to $5 million of “growth investments and incremental operating expenses” by the end of the year that were not contemplated in the original 2018 outlook. These items include investments to support managed care growth and “support for a citizens' initiative in Oklahoma,” which relates to a ballot question that would have permitted optical departments to operate within Walmart stores. National Vision invested $1 million to support the ballot question, which was narrowly defeated, as VMAIL reported

On a nine-month basis, National Vision said net revenue increased 12.1 percent to $1.2 billion, comparable-store sales rose 7.4 percent and adjusted comparable-store sales increased 6.6 percent. The company opened 58 new stores overall, closed four stores and ended the period with 1,067 stores. Net income totaled $43.9 million compared with $17.1 million for the same period of 2017.