National Vision Holdings, Inc. Q1 FY2025 earnings call

• Reade Fahs announced CEO succession plans with Alex Wilkes succeeding him as CEO on August 1, 2025, and Reade transitioning to Executive Chair. He highlighted the strength of first quarter results showing the transformation is working, with sales up 5.7%, adjusted operating income up 21.8%, and adjusted diluted EPS up to $0.34. - Alex Wilkes emphasized leading National Vision during transformation, focusing on heightened segmentation, personalization, and digitization. He discussed pricing actions, product assortment evolution (e.g., introducing L.A.M.B. and Ted Baker brands), store associate enrollment and training, and digital tool rollout (e.g., in-store app). - Chris Laden detailed net revenue growth driven by adjusted comparable store sales and new store sales, store count changes (opened 9 new stores, closed 3 America's Best and 9 Fred Meyer stores), average ticket increase supported by transformation initiatives, and balance sheet status with cash balance of ~$80 million and total liquidity of $374 million.

Net revenue increased 5.7% to $510 million in the first quarter. Adjusted comparable store sales growth was 5.5%. America's Best had a 5.9% comparable store sales, Eyeglass World had 3.1% comp store sales. The three target customer segments (managed care, progressive, outside Rx) delivered double-digit comps. Adjusted comparable store sales were driven by a 4.5% increase in average ticket, supported by transformation initiatives. Revenue contribution details weren't explicitly given by segment percentage, but the three target segments represent about half of customers but a disproportionately large percentage of sales.

• Raised full-year guidance. Now expects net revenue between $1.919 billion and $1.955 billion, supported by adjusted comparable store sales growth of 1.5% to 3.5% and new store sales (opening ~30-35 stores). - Adjusted operating income expected between $81 million and $92 million. - Modeled to mitigate potential higher tariff costs with pricing actions and cost reduction efforts but didn't include tariff impact in guidance. The 53rd week is estimated to add ~$35 million net revenue and ~$3 million adjusted operating income.

• Uncertainty around consumer demand due to macroeconomic factors. - Fluid tariff situation with potential impact on National Vision and its customers, though measures are in place to mitigate tariff impact on adjusted operating income.

Q: If you assume no conversion degradation, is the run rate for ticket to become higher in the next couple of quarters given mix changes?

A: Alex Wilkes said there's runway as pricing is an ongoing muscle, no degradation in conversion or NPS, and customers are responding well to introduced products.

Q: Decompose revenue growth between managed care and customer pay. Are you optimizing managed care budgets?

A: Alex Wilkes said it's a bit of both, introducing premium products benefits the totality of the customer base, including managed care customers who have higher spending power.

Q: Walk through Q1 comp cadence and income demographics gap.

A: Reade Fahs said January was strong, February had a peculiar two-week period, March came back strong. There was a trade into higher income customers with lower income customers dropping out, but National Vision provides value to all.

Q: Where is private label product made and third-party product exposed to China tariffs? Can you switch away?

A: Alex Wilkes said less than 10% of cost of goods is exposed to China, supply chain has been shifted around Asia, and private label is where most sourcing shifts have been made.

Q: How much of ticket increase is from pricing actions vs selling practices?

A: Alex Wilkes said ~two-thirds of ticket increase is from pricing decisions in Q4 and Q1, remaining third from assortment changes and selling behaviors.

Q: Tariff commentary: Is $10M-$15M incremental product cost fully mitigated?

A: Chris Laden said they believe they can offset incremental costs with average ticket increase and cost mitigation efforts, not included in guidance.

Q: Remote exams quantification and profitability impact?

A: Reade Fahs said remote is ~two-thirds of store base, underdeveloped stores are few, and over time there will be efficiency improvements in the exam ecosystem.

Q: Low-income consumer weakness and exam cycles?

A: Reade Fahs said low-income consumers are tighter, shift to managed care is a trend, and managed care purchase cycle is normal. Retention and recruitment of optometrists are healthy with no cost increases noted.

Q: Insights on optimal store economics and remote-enabled capabilities at smaller stores?

A: Alex Wilkes said they're testing smaller format stores, evaluating store design with a design firm, and remote-enabled capabilities are part of ongoing evaluations.

Q: Doctor feedback on targeting managed care customers?

A: Alex Wilkes said doctors are excited, managed care patients have shorter purchase cycles and are compliant, aligning with doctors' belief in annual exams.

Q: Improved product margins from eyeglass frames and lenses? Mix shift vs like-for-like?

A: Chris Laden said it's a combination of about two-thirds price increases and one-third mix shifts, with mix shifts neutral or accretive to margins.

Q: Advertising expense outlook?

A: Alex Wilkes said they're working with a new agency, evolving media mix for efficiency, and CRM go-live in the second half will enhance marketing effectiveness.

Q: Traffic increase driver and managed vs cash pay comps?

A: Alex Wilkes said traffic increase is from leaning into target customer segments, managed care continues to grow strongly, cash pay consumer is strapped but has also traded up.

Q: Reason for conservatism in full-year guide and new store openings cadence?

A: Chris Laden said conservatism is due to macroeconomic uncertainty. New store openings are expected to be ~30-35 in the year, with about half in the first half and half in the second half, with Q4 typically heavier in the second half.

Q: Opportunity to capture market share due to tariffs and labor wage rates for optometry?

A: Alex Wilkes said National Vision is well-positioned to capture market share due to supply chain shifts. On labor wages, there are no excessive concerns about optometrist wage rate compression, and doctor pay and incentives are managed well with dark stores reduced to a handful.