National Vision expects adjusted comparable store sales to grow by only 5 to 9 percent in the fourth quarter, after rising by 12.4 percent in the previous three months, as pent-up demand peters out. The third quarter experienced a strong rebound after comparable sales declined by 36.5 percent in the second quarter and by 10.3 percent in the first quarter due to the impact of the Covid-19 pandemic.
For the year as a whole, the U.S. company, which manages the banners America’s Best, Eyeglass World, Vista Optical and Vision Center in Walmart stores, predicts adjusted comparable store sales to drop by 6.4-7.4 percent.
In the third quarter ended on Sept. 26, net revenues increased by 12.4 percent to $485.4 million. Adjusted comparable store sales were driven by Eyeglass World, up by 18.4 percent, and America’s Best, up by 13.6 percent. Eyeglass sales were underpinned by an increase in customer transactions and of the average ticket.
In the quarter, the company opened 17 net new stores in the quarter. Over a 12-month period, it added 56 stores, after opening 65 units and closing nine. It has focused on the America’s Best banners, with additional 58 locations in the last 12 months, and Eyeglass World, two extra stores over the period. As of Sept. 26, National Vision had 1,201 stores, up by 4.9 percent from a year earlier.
Costs applicable to revenues decreased to 43.4 percent from 47.3 percent for the third quarter of 2019, driven by an improved eyeglass mix, higher eyeglass margin, and lower growth in optometrist costs. Selling, general and administrative expense decreased by 4.80 percentage points to 39.3 percent due to lower advertising investment and stock-based compensation expenses.
The adjusted operating margin widened to 14.0 percent from 6.0 percent for the third quarter of 2019. Net income increased to $35.3 million from $1.2 million a year ago and adjusted diluted earnings per share (EPS) grew by 226 percent to $0.54.
In the first nine months of the year, net revenues decreased by 8.1 percent to $1,215 million and adjusted comparable store sales dropped by 11.1 percent.
Adjusted operating income decreased by 27.0 percent to $71.4 million, while net income declined by 96 percent to $1.2 million and adjusted diluted EPS dropped by 36.0 percent to $0.42
Cash flows from operating activities for the first nine months were $203.7 million compared to $170.9 million for the same period of 2019 and capital expenditures totaled $40.8 million compared to $76.5 million.
In the fourth quarter ending on Jan. 2, the company expects to open about five stores and to post net revenues of $460 to $475 million, adjusted operating income of $20 to $25 million and adjusted diluted EPS of $0.10 to $0.14.
In the final quarter, the company does not assume a “material” deterioration of its business environment due to the pandemic.
For the whole fiscal year, National Vision anticipates some 57 new stores and total revenues of $1,675 to $1,690 million. Adjusted operating income is seen coming in at $91 to $96 million and adjusted diluted EPS at $0.53 to $0.57. Capital expenditures are estimated at $75 to $80 million for the full year.
On Oct. 26, National Vision appointed Susan Somersille Johnson, chief market officer at the life insurance group Prudential Financial, to its board. With it her nomination, the company’s board of eight directors is evenly balanced with four men and four women. National Vision’s chief executive Reade Fahs noted that Johnson brings marketing analytics, customer experience and mission orientation skills to the board. Johnson started her career as an engineer at Apple before taking on a series of high-profile marketing roles at groups including NCR and Nokia.