DULUTH, Ga.—Operating against a backdrop of “macro headwinds” that impacted its core patient/consumer, National Vision Holdings (NASDAQ: EYE) reported on Thursday that its net revenue declined 7.3 percent to $509.6 million, as comparable-store sales were down 11.0 percent on a reported basis and down 12.4 percent on an adjusted basis. Net income decreased 74.1 percent to $9.7 million, while adjusted operating income declined 57.6 percent to $27.8 million in the second quarter ended July 2.

The company opened 22 new stores and ended the quarter with 1,314 stores. Overall, store count grew 5.2 percent from July 3, 2021 to July 2, 2022.
“In the second quarter, we continued to progress our key growth initiatives despite the challenges of the dynamic consumer environment,” chief executive officer Reade Fahs said in the company’s earnings announcement. “We opened 22 stores this quarter and remain excited about our potential growth opportunities in U.S. value optical. Our accelerated rollout of remote medicine is adding incremental exam capacity and remains on track to be operational in up to 300 stores by year-end. In addition, we are pleased to have recently signed a multi-year extension of our current lens purchasing agreement with EssilorLuxottica.”
In mid-July, National Vision entered into an amendment to an earlier agreement with Essilor of America to, among other things, extend the term of the company’s contractual agreement with Essilor for three years from May 2023 to May 2026. Under the agreement, Essilor has the sole and exclusive right to supply certain lenses for eyeglasses to the company.
Fahs added, “As it pertains to the remainder of the year, we continue to expect our near-term performance to be affected by macro headwinds facing our lower-income consumer and constraints to exam capacity. We've made significant progress in our cost alignment efforts that should temper the impact to profitability from the lowered revenues in our fiscal 2022 outlook. Looking ahead, we are confident in our business model and our strategy and believe we remain in a position of strength to deliver sustainable growth.”
Given the challenging environment, National Vision said it was lowering its forecasts for 2022 (citing such factors as inflation, geopolitical instability and risks of recession, as well as constraints on exam capacity and the ongoing COVID-19 pandemic). The updated outlook for the 52 weeks ending Dec. 31, 2022, calls for net revenue in a range of $1.99 billion to $2.02 billion, down from the previous forecast of $2.01 billion to $2.07 billion.
The forecast for adjusted same-store sales has been revised to a range of negative 6.5 percent to negative 8 percent (previously negative 4 percent to negative 7 percent).
On a conference call with analysts, Fahs said he believes the “key takeaways” from the earnings report include the idea that “after 18 years of consistency and predictability, the pandemic era has temporarily made the optical market, and consequently our business, more volatile.”
He added, “We believe that the marketplace over time should return to trends more consistent with the pre-COVID era, especially as our customers’ eyes only continue to get worse with time and we remain a low-cost provider of this medical necessity. We operate in a highly fragmented industry with ongoing structural tailwinds …. and we believe that several initiatives, including our remote medicine rollout, should help us to get our exam capacity more in line with the demand that is there for exams at our stores. Thus despite the current challenges, our confidence in our mid- and longer-term prospects remains unchanged.”
In the second quarter, National Vision said its costs applicable to revenue decreased 0.6 percent to $234.6 million compared with a year ago. As a percentage of net revenue, costs applicable to revenue increased 310 basis points to 46.0 percent compared with the second quarter of 2021. This increase as a percentage of net revenue was primarily driven by deleverage of optometrist-related costs, reduced eyeglass mix and lower eyeglass margin, the company said.
In addition, SG&A decreased 2.7 percent to $227.8 million. As a percentage of net revenue, SG&A increased 210 basis points to 44.7 percent, with the increase primarily driven by deleverage of store payroll and occupancy expense, partially offset by lower performance-based incentive compensation, stock-based compensation expense, and lower advertising.
The company’s cash balance was $254.4 million as of July 2, and there were no borrowings under its $300 million first lien revolving credit facility, exclusive of letters of credit of $6.4 million. Total debt was $568.8 million, consisting of outstanding first lien term loans, convertible senior notes and finance lease obligations, net of unamortized discounts.
Capital expenditures for the first six months of 2022 totaled $55.7 million compared with $38.8 million for the same period of 2021.
Also on Thursday, National Vision said that Patrick Moore, chief financial officer, has been appointed to the role of chief operating officer and will continue to serve as chief financial officer through the end of 2022. As chief operating officer, Moore will be leading the following functions: retail operations, clinical services, real estate, labs, manufacturing and distribution, and strategy.
Melissa Rasmussen, senior vice president, accounting and finance, has been appointed to succeed Moore as the company’s chief financial officer, effective Jan. 1, 2023. Moore will continue in the role of chief operating officer following this transition.
National Vision operates more than 1,300 retail stores in 44 states and Puerto Rico, and its store banners include America’s Best Contacts & Eyeglasses, Eyeglass World, Vision Centers inside select Walmart stores, and Vista Opticals inside select Fred Meyer stores.