National Vision Reports Double-Digit Sales Increase for Third Quarter

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DULUTH, Ga.—Marking its 71st consecutive quarter of comparable-store sales growth, National Vision Holdings Inc. (NASDAQ: EYE) reported Thursday that its net revenue increased 11.5 percent to $431.9 million in the third quarter, driven in part by adjusted comparable-store sales growth of 6.2 percent (5.7 percent non-adjusted) in the quarter. Net income totaled $1.2 million in the quarter, which compares with net income of $5.2 million in the year-ago period. However, adjusted net income increased 65.8 percent to $14.5 million, compared with $8.7 million in last year’s third quarter.

In addition, National Vision said it opened 17 new stores in the quarter, and ended the period with 1,145 stores as it remains “on track” to achieve its goal of opening 75 new stores this year. Overall, store count grew 7.3 percent in the 12-month period ended Sept. 28.

“We are very pleased with our third quarter and year-to-date results,” chief executive officer Reade Fahs said in the announcement. “We experienced strong operating momentum throughout the third quarter with double-digit gains in net revenue and adjusted EBITDA growth. ... These results reflect the ongoing strength of our attractive value proposition that continued to resonate with patients and customers,” he added, noting that the achievement of 71 consecutive quarters of positive comparable-store sales “demonstrates the consistency and predictability of our business model.”

For the full year 2019, National Vision updated its guidance for net revenue to a range of $1.705 billion to $1.712 billion, and adjusted EBITDA to a range of $189 million to $192 million. Also, on Oct. 31, National Vision said it used cash on hand to make a $25.0 million voluntary prepayment of outstanding principal under the term loan of its credit agreement.

For its current third quarter, National Vision reported that adjusted EBITDA increased 24.7 percent to $47.9 million, while adjusted EBITDA margin increased 120 basis points to 11.1 percent (from 9.9 percent), primarily due to higher eyeglass margin, and store payroll and advertising leverage, partially offset by increased net revenue from the AC Lens contact lens distribution business growth, National Vision noted in its announcement.

“As 2019 comes to a close, we remain excited about our potential growth opportunities in U.S. value optical retail,” Fahs added.

During a conference call with securities analysts, Fahs noted that the third-quarter results were “fueled by solid execution across many fronts, including real estate, marketing and store operations,” and he noted that opening new stores remain “a primary focus as we continue to see a sizable white-space opportunity given our current foot print. … As we look out to 2020, the pipeline of locations looks strong.”

He also noted that National Vision continues to invest in optometrist recruitment and retention as it “strives to be the place where the best optometrists practice.” In terms of store productivity, Fahs said that mature stores are deriving 64 percent of business from existing / returning customers.

In terms of impact from the ongoing U.S.-China trade dispute, Fahs said that the company estimates that product imported from China represents “less than 16 percent of costs applicable to revenues,” and since Sept. 1 these products have been subject to 15 percent tariffs. “We continue our diligent effort to mitigate the impact of these tariffs,” he explained. “We’ve been working with our suppliers and looking at all areas of our supply chain, as well as reviewing our pricing and cost structure. We remain focused on operating a cost-efficient supply chain and maintaining our commitment to our industry-leading low-price strategy. As a result of these initiatives, we are positioned to offset the impact of the 15 percent tariffs this year.”

In the nine-month period, National Vision said net revenue increased 12.0 percent to $1.3 billion from $1.2 billion for the same period of 2018. Net revenue was negatively impacted by 60 basis points due to the timing of unearned revenue, the company said. Comparable-store sales growth was 5.5 percent over the nine-month period, and adjusted comparable-store sales growth was 5.6 percent.

The company opened 67 new stores and closed four stores over the January-December period.

Net income totaled $28.9 million, which compares with net income of $42.1 million for the same period of 2018.