National Vision Holdings, Inc. (EYE) Earnings

Management highlights

- Overall Strategic Progress * National Vision's four growth vector strategy (growing demand, improving average ticket, expanding margins, closing capability gaps) is delivering results, with Q1 2026 performance confirming progress toward building a stronger, more profitable company * The company is intentionally shifting its customer mix toward more profitable managed care, progressive, and outside RX customers, which supports stronger comps and higher profitability * Value leadership remains core to the brand, while the company invests in modernizing the customer experience across digital and in-store channels - Merchandising & Product Innovation * Introduced new private label frame options at price points above $100, launched the Stetson frame line to capture Western style trends, rolled out Swarovski across emerging brands, and launched Kendra Scott sunglasses in April 2026 * Scaled Ray-Ban Meta and Oakley Meta smart glasses to all America's Best and Eyeglass World stores and online, expanding the assortment with prescription-focused MetaOptics products that offer improved comfort and battery life; early demand has exceeded expectations * Began piloting Nikon Eyes premium branded lenses in May 2026, the most advanced progressive lens the company has ever offered, which addresses the key customer pain point of poor adaptation to progressive lenses * Will add premium brands including Tory Burch, Polaroid Lorne, and Persol to America's Best assortments starting in June 2026 * Rolling out data-driven store segmentation, which will tailor assortments to local customer demand, phase one launches for America's Best in late Q2 2026, with Eyeglass World to follow in Q4 2026 - Digital & Marketing Capabilities * Completed the re-platforming of AmericasBest.com at the start of Q2 2026, a key step in building unified omnichannel capabilities; the transition caused temporary search and social marketing traffic disruption, but sequential traffic improvement is underway * Completed CRM re-platforming, which is delivering positive early results, enabling more sophisticated, personalized customer engagement across the lifecycle and improving unaided brand awareness for America's Best * Ongoing work to reposition the Eyeglass World brand, with an update planned for later in summer 2026 - Expansion & Operational Initiatives * Expanded the military optical partnership with the Army and Air Force Exchange Service (AFI) to 72 total locations, becoming the sole optical provider for U.S. Army and Air Force bases; these new stores are not included in 2026 guidance and are not expected to have a material full-year impact * Expanded associate training in May 2026 for Ray-Ban Meta and new premium products to improve in-store experience consistency * Continues to make cautious progress on hybrid remote optometry tech pilots, with early positive signals but no large-scale rollout planned yet * On track to deliver $10 million in annualized cost savings in 2026 via disciplined procurement and cost management initiatives

Guidance

- Management reaffirmed its full fiscal 2026 guidance, maintaining prior targets after Q1 2026 performance met expectations * Net revenue is expected to be between $2.03 billion and $2.09 billion, with adjusted comparable store sales growth projected in the 3% to 6% range * Adjusted operating income is expected to be between $107 million and $133 million, with midpoint guidance implying 100 basis points of adjusted operating margin expansion versus fiscal 2025 (excluding the 53rd week) * Adjusted diluted EPS guidance remains $0.85 to $1.09 per share, based on 82 million weighted average diluted shares outstanding * Capital expenditures are projected to be between $73 million and $78 million, with 30 to 35 new stores planned (net 20 to 25 new stores after 10 to 15 planned closures for fleet optimization), excluding the 20 new military stores added in Q1 * Interest expense is projected to be between $14 million and $16 million, and the effective tax rate is expected to be approximately 28% * Q2 2026 comparable store sales are currently tracking in the low single-digit range, impacted by temporary website re-platforming disruption; management expects comp growth to strengthen in the back half of 2026 as digital traffic recovers and new product initiatives launch * Quarterly adjusted operating margin growth is expected to be more favorable in Q1 and Q3, with flat to modest growth projected for Q2 and Q4, matching prior guidance cadence

Segment performance

No explicit product segment breakdown is provided in the transcript. Overall net revenue for Q1 2026 grew 6.6% to $544 million. Adjusted comp store sales increased 4.5%: 5.1% average ticket growth (driven by managed care strength and product mix initiatives) offset a 1.2% overall customer traffic decline. Positive traffic from the managed care, progressive, and outside RX customer cohort partially offset softer cash pay traffic. Adjusted operating income increased to $55.5 million from $41.3 million in the prior year quarter, with adjusted operating margin expanding 210 basis points to 10.2%. Adjusted SG&A was $246 million, and leveraged 200 basis points as a percentage of revenue. Adjusted EPS increased to 45 cents per share from 34 cents in Q1 2025. As of Q1 end, the company had 1,274 total stores: 8 new America's Best stores opened, 3 America's Best stores and 1 military store closed, and 20 new military optical sites were added via the expanded AFI partnership, making National Vision the sole U.S. Army and Air Force base optical provider.

Risks & headwinds

- The website re-platforming completed at the start of Q2 2026 caused temporary traffic disruption for America's Best, primarily impacting online exam bookings due to the need to re-establish search and social marketing signals; while sequential improvement is ongoing, full recovery to normal traffic and CPA efficiency is still in progress - Cash pay consumer traffic remains suppressed across income cohorts, reflecting broader macroeconomic volatility, including pressure from fluctuating gas prices and slower repurchase velocity compared to historical norms; this trend has persisted for over a year - The ongoing shift to premium frames and lenses creates modest nominal downward pressure on gross margin percentage, even as it increases total gross margin dollars - The transformation strategy includes large-scale operational changes (digital re-platforming, store segmentation, product expansion) that carry inherent execution risk, though management built contingency cushion into full-year guidance - The company operates in a dynamic consumer environment with weather volatility and geopolitical uncertainty that can impact near-term demand patterns

Analyst Q&A

• Q: What is the magnitude of the traffic impact from the AmericasBest.com re-platforming, and how is it trending in Q2 to date? /

  A: Management intentionally launched the re-platform in Q2, the company's lowest volume quarter of the year. There are no technical issues with the new site; the disruption is entirely from re-establishing search and social marketing signals after the full platform change. Traffic started Q2 in negative territory but has improved sequentially week-over-week as signals are reconnected. The disruption is not large enough to push full-year results outside the existing guidance range, and the re-platforming is a critical long-term strategic investment.

• Q: Can you break down traffic trends between cash pay and target managed care/progressive/outside RX customers, and explain gross margin drivers for 2026? /

  A: Cash pay traffic remained suppressed in Q1, consistent with recent quarters, but average ticket for cash pay customers is positive as they adopt premium products at higher rates. The targeted managed care/progressive/outside RX cohort grew traffic positively in Q1, supporting overall profitability. For full-year 2026, gross margin percentage is expected to be roughly flattish (slightly nominal negative); nominal price increases contribute modest upside, but mix shifts to more premium products create modest downward pressure on margin rate while increasing total gross margin dollars, which drives overall operating income leverage.

• Q: Despite the temporary Q2 traffic headwind from re-platforming, why are you maintaining full-year guidance? Is there enough cushion or upside from other initiatives to offset the softness? /

  A: Management built reasonable risk contingencies into the original full-year planning scenario for the company's ongoing transformation. Upside from upcoming initiatives including store segmentation, the Nikon Eyes premium lens launch, and long-term benefits from the new e-commerce and CRM platforms is more than enough to offset early Q2 traffic softness. Management reaffirmed full commitment to the existing 3% to 6% comp growth guidance range and is confident results will land within the stated full-year range.

• Q: What early performance are you seeing for Ray-Ban Meta AI smart glasses, and how does the product impact margins? /

  A: Management is very pleased with early performance, after scaling the product to all stores in early Q2 based on strong early pilot demand. Sell-through and adoption from both associates and consumers have exceeded expectations, and average transaction value for Meta smart glasses is among the highest in the company's entire product portfolio. The product is highly accretive to total gross margin dollars due to its high ticket, but it is not materially accretive to gross margin percentage from an input cost perspective. No upside from this new category has been built into 2026 guidance, and it is purely a long-term additive opportunity.