Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenues increased by 2.9% to $451.5 million, driven by strong managed care results.
- Adjusted operating income rose by 22.2% to $14.3 million, indicating improved profitability.
- The company plans to close underperforming stores, which is expected to deliver approximately $4 million in adjusted EBITDA improvement by the end of 2026.
- New strategic initiatives include traffic-driving promotions and expanding optometric capacity, with over 730 locations now enabled with remote technology.
- The introduction of new product lines, such as the Florence by Mills Eyewear Collection and Pair Eyewear, aims to attract younger audiences and enhance fashion credibility.
Negative Points
- Softness in cash pay and lower e-commerce revenue partially offset the revenue growth.
- Eyeglass World experienced a decline in comparable store sales by 0.9%, impacted by Hurricane Helene.
- The company plans to temporarily moderate new store growth in 2025, which may slow expansion.
- E-commerce performance was negatively impacted by the transition of the discount contact dotcom website.
- The company recorded $14 million in noncash impairment charges related to the Fred Meyer intangible asset and other tangible long-lived assets.
Q & A Highlights
Q: Can you provide a sense of what the changes in store portfolio, pricing architecture, and operational processes mean for the margin profile of the business in 2025?
A: Melissa Rasmussen, CFO: The 2025 margin profile is expected to be similar to 2024, considering headwinds from incentive compensation turning into a headwind next year. Benefits from fleet optimization were anticipated, but the moderation in store growth and initiatives to drive comparable store sales growth were not initially included. These updates suggest potential upside, with more details to be provided in the 2025 guidance.
Q: Is National Vision more willing to use pricing as a lever, and how does this relate to potential tariff impacts?
A: Alex Wilkes, President: While committed to being a value-based brand, there is opportunity to expand pricing, balancing pricing and promotional approaches. The managed care consumer base has grown, requiring a different pricing approach. Melissa Rasmussen, CFO: Less than 10% of costs are subject to tariffs, and significant progress has been made in moving activities out of China, minimizing tariff impacts.
Q: How are promotions being viewed for the future, and what impact did they have on gross margins in the quarter?
A: Reade Fahs, CEO: Promotions have been effective in driving new traffic, particularly with progressive offers, and will continue targeting cash pay customers. Melissa Rasmussen, CFO: Promotions impacted gross margin, but the increase in traffic more than offset this impact.
Q: What is the current status and future plan for remote exam capabilities?
A: Reade Fahs, CEO: There are 730 remote-enabled stores, with a few dozen more expected by year-end. The percentage of exams conducted remotely in enabled states is about 11%. The hybrid remote model, where doctors can perform exams remotely in other stores, is showing promise for systemic efficiency improvements.
Q: Can you provide details on the store closures and the rationale behind reducing new openings in 2025?
A: Melissa Rasmussen, CFO: The store closures targeted less than 5% of the fleet, focusing on stores that were unprofitable or had insufficient demand. The decision to moderate new store growth allows for capital reallocation to improve the existing store fleet and enhance the customer experience, with plans to reaccelerate growth once initiatives take hold.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
