National Vision’s Fahs: Forecasting Expansion and a Vision Category of ‘Interdependence’

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National Vision’s Reade Fahs (l) and Bruce Steffey (r) flank NASDAQ’s Adena Friedman.

NEW YORK—Just after National Vision Holdings (Nasdaq: EYE) debuted on the NASDAQ exchange at 11:05 am at $28.75, or 31 percent above its initial public offering price of $22, VMail sat down with company CEO, Reade Fahs, to assess the milestone for the firm, its executives, associates, doctors and patients.

As VMail reported yesterday from the exchange here, the company offered 15.8 million shares for sale, to raise $347.6 million. National Vision plans to use the proceeds to repay debt and for general corporate purposes, which includes the payment of interest on term loans.

Asked to characterize the day’s achievement, Fahs talked about the company’s back story. “As you know, back in 2002, the company had recently emerged from bankruptcy, we had a market cap of about $5 million, we had a mountain of debt… When this team came on board, we had a vision of what could be built. So today is certainly a validation.”



“Secondly,” he continued, “although we’ve been comfortable in levered environments, it’s nice to be in a less levered environment.” Fahs was referring to the fact that private equity firm KKR held about a 75 percent ownership position in National Vision before today’s offering, and Berkshire Partners held about 18 percent of the company. After the offering is completed, it is expected that KKR’s stake will shrink to about 58 percent to 60 percent (depending on the underwriters’ options) and Berkshire will continue to own about 13 percent to 14 percent of the company.

“And finally,” he remarked, “we’re going to continue to invest in growth. We’ve been telling investors optical retailing is a really great place to be. We think it’s part of Retail 2.0, it’s both a service and a product. It’s uniquely well suited for the future.”

Asked about investors’ current perceptions about the optical business, Fahs added, “We just finished two weeks flying all over the country and meeting with some of the country’s most sophisticated investors and being drilled with all kinds of questions about the optical industry and our role in it. Of course, they’re all asking, ‘What might Amazon do? What’s e-commerce going to do?’ And I’ve reinforced that this is a business which is uniquely very stores-based.



“The fact is that various e-comm players were so very loud and proud of the message of, ‘We’re going do internet eyeglasses,’ and then what did they do? They started building stores. There’s the realization that if you’re consumer focused, you’re probably going to be physically, stores focused. That’s a good thing for our business and for eye health.”

VMail inquired about the current state of private equity investment in the industry, Fahs said, “Certainly we’re living through a period of increased consolidation where we have Luxottica and Essilor merging, you’ve got MyEyeDr. and EyeCare Partners out there acquiring more independents and small chains. There are buying groups that are being purchased by Essilor—all are changing the nature of what is an ‘independent.’ The term I like to use is that the vision category is now more interdependent than it has ever been. The challenges for an independent optical, given the managed care piece, the CL distribution part, price and supply, all heighten the interdependence of the category.”

Said Fahs, “What it means for us is continued growth and expansion. A validation of our mission to be the best in the low-cost segment of the market. We have said we will continue to grow, with the opening of 75 stores a year, a majority of those America’s Best and also Eyeglass World. We’ve said that America needs us to build at least another 1,000 stores and we’re trying to give America what they need.



“Omnichannel is also a factor in all this, and that will continue to play a role. Some consumers want to buy online and some don’t. We’re sharing that e-comm is about 4 percent of our business overall currently.”

Regarding National Vision’s company’s social purpose philosophy, Fahs said, “We’ve been talking about how should we take our unique qualifications and contribute to the good of the world. The one thing about our category is that it provides so many different avenues that one can contribute to the public good of the world, because we’re in the public health field.

“The lack of eyeglasses for low income people is a major global public health issue. It’s a problem even in a rich country like America. So we’ve been dedicated for a few years to our partnership with Boys and Girls Clubs of America. We screen kids and bring those who fail screenings to our stores for exams and free glasses. We talk about what’s the difference between second grade and fifth grade, and that by catching these problems, you can just change the trajectory of a child’s life.

“We’re also globally good partners with VisionSpring, RestoringVision.org, VOSH International and other groups like them for a long time. We like to say we sit in the middle of an ecosystem of groups trying to address vision health, a major global health issue,” he said.