BUSINESS: Financial Amid Challenges of Pandemic, National Vision Reports Q1 Declines in Revenue and Same-Store Sales, With Move to Expand ‘Remote’ Exam Initiative By Staff Wednesday, May 11, 2022 12:27 AM DULUTH, Ga.—National Vision Holdings Inc. (NASDAQ: EYE) on Tuesday morning reported that its net revenue declined 1.2 percent to $527.7 million in the first quarter, as comparable-store sales fell 4.9 percent (down 6.8 percent on an adjusted basis). Net income decreased 30.6 percent to $30.1 million in the period ended April 2 as the challenges of the COVID-19 pandemic had an impact across the retailer’s more than 1,200-location store base. National Vision also noted that, in response to capacity challenges, it will accelerate the rollout of its remote medicine initiative, and now projects offering remote exams in 300 locations by year’s end, an increase from the at least 200 locations previously planned for 2022.“Within the pandemic era that has brought swings of both opportunity and challenge, the first quarter was a more challenging quarter,” chief executive officer Reade Fahs said. “With headwinds from the Omicron variant, weaker consumer confidence, and emerging constraints to exam capacity, our comps declined as we lapped a record performance last year. During the quarter, we continued to execute our growth strategy and opened 17 stores, including two Eyeglass World stores as we ramp up expansion of this brand.” On a conference call with securities analysts, Fahs noted that the company observed that “the consumer, especially in March and April, really slowed down, especially our lower-income uninsured consumers.” In addition, Fahs noted that, as the company contends with an inflationary operating environment, it has implemented this week the first pricing change to its America’s Best signature offer in over 15 years. The banner now offers two pairs of eyeglasses, including a free eye exam, for $79.95 (previously $69.95 starting price). And the signature offer at Eyeglass World was increased to two pairs for $89 during the first quarter. Fahs said the company continues to deliver “industry-leading value to consumers. We expect these actions, combined with easier compares, to lead to improving performance later this year. Despite the short-term challenges, we are confident in the broad appeal and health of our business model and remain well-positioned to deliver sustainable growth as we move beyond this period.” Commenting further on the “remote medicine” expansion, Fahs said, “We are extremely pleased with the increasing exam capacity, being added by remote medicine and the role it can play in serving more patients across both geography and time. So despite the temporary challenges facing our business, we remain confident in the long-term strength of our business model.” The updated fiscal year outlook now shows projected 2022 sales in the range of $2.01 billion to $2.07 billion (compared with the previous outlook of $2.12 billion to $2.17 billion). The adjusted operating income is projected in the range of $85 million to $105 million (compared with $140 million to $150 million). New-store openings planned for 2022 remained constant with “at least 80” locations. The updated outlook “reflects the currently expected impacts related to macro-economic factors, including the ongoing COVID-19 pandemic, inflation, geopolitical instability, and risks of recession, as well as constraints on exam capacity.” On a call with securities analysts, chief financial officer Patrick Moore said the updated outlook same-store sales comparisons “in the negative low-teens and modest profitability for the second quarter. For the second half, we now expect comps to be in a range of negative low single digits to positive low single digits due to easier comparisons, moderating average ticket pressure and increased exam capacity.” He also noted that store openings this year will continue to be predominantly America's Best locations, coupled with a doubling of Eyeglass World openings. Fahs added, “Looking ahead, we expect the macro headwinds to our lower-income consumer as well as the constraints to exam capacity to impact our near-term performance and are updating our fiscal 2022 outlook. We are actively working to increase exam capacity with enhanced optometrist recruiting and retention programs as well as an accelerated rollout of our remote medicine initiative.” The company opened 17 new stores in the first quarter, closed three stores, and ended the period with 1,292 stores. Overall, store count grew 5.0 percent from April 3, 2021, to April 2, 2022. On the financial side, costs applicable to revenue increased 5.1 percent in the quarter to $236.0 million compared with the first quarter of 2021. As a percentage of net revenue, costs applicable to revenue increased 260 basis points to 44.7 percent compared with the first quarter of 2021. “This increase as a percentage of net revenue was primarily driven by the deleverage of optometrist-related costs, lower eyeglass margin and decreased eyeglass mix,” the company reported. Also in the first quarter, adjusted operating income decreased 33 percent to $45.3 million and adjusted operating margin decreased 410 basis points to 8.6 percent. SG&A expenses increased 2.2 percent to $228.6 million.