National Vision Holdings, Inc. Q2 FY2025 earnings call

• Brand Evolution: Launched new National Vision branding, with America's Best set to launch a transformational campaign next week. The new branding reflects the company's purpose and momentum.
• Product Assortment: Moving frames priced over $99 to approximate 40% this year through new brands. Recently launched designer partnerships like Lam, Ted Baker, Jimmy Choo, and HUGO BOSS are performing well. Focus on expanding addressable market with progressive lens wearers and outside Rx customers.
• In-Store Experience: Conducted comprehensive lifestyle training across the organization in May to enhance selling to consumer lifestyle needs while maintaining value.
• Digital Marketing and Omnichannel: Progress on CRM platform with Adobe, successfully migrated customer database and launched pre-existing campaigns. First phase of new ERP for finance and accounting implemented in Q2.
• Eyeglass World: Best first half performance since 2021 after leadership change. Modified doctor model in Florida to enhance patient experience and access to care.

For the second quarter, National Vision saw adjusted comparable store sales growth of 5.9%. Managed care business delivered low double-digit comp growth, bolstered by strong growth in both ticket and traffic. Cash pay business continued to deliver positive comp growth in the low single-digit range, driven by ticket. Net Promoter Scores increased. Doctor coverage remains healthy, and remote exam technology surpassed 1 million exams conducted. In terms of revenue contribution, managed care and cash pay segments are key, with managed care showing strong growth in ticket and traffic, and cash pay maintaining positive comps despite traffic decline due to anniversary of prior promotions.

• Raised full-year outlook: Now expects revenue between $1.93 billion and $1.97 billion, adjusted comparable sales growth of 3% to 5%, adjusted operating income between $85 million to $95 million, and adjusted EPS of $0.62 to $0.70. This incorporates the benefit of a 53rd week, which adds ~$35M net revenue and ~$3M adjusted operating income but doesn't impact adjusted comparable store sales growth.
• Assumes no additional pricing actions, will evaluate consumer response to merchandising assortment and selling techniques to inform next steps.
• Guidance assumes second half traffic trends in line with Q2 performance and waits for proof points from new CRM platform and America's Best brand assets before incorporating potential benefits.

• Macro backdrop uncertainties that could impact actual results.
• Tariff environment, though latest policies have reduced the anticipated impact from prior estimates.
• Need to continue monitoring consumer response to evolving merchandising assortment, selling techniques, and pricing to ensure sustainable growth.

Q: On managed care expansion visibility, can you talk about number of new plans and penetration?

A: Alexander Wilkes says they're happy with managed care growth, but won't talk specific plans, mentions ~50% mix and continuing to push managed care growth.

Q: On cash customer traffic, how to drive it?

A: Alexander Wilkes notes cash pay cohort shrinking to managed care, focusing on reinventing America's Best marketing and CRM to control cash pay consumer destiny, pleased with cash pay comps positive when aggregating traffic and ticket.

Q: On America's Best comp growth, breakdown of price increases and assortment elevation?

A: Christopher Laden says majority of growth driven by price actions, assortment elevation ongoing, and changes resonating with consumers without driving traffic decline.

Q: On margin outlook and historic margin gap?

A: Christopher Laden says margin expansion is a focus, will provide more context at Investor Day, actions like assortment changes and cost controls aim to expand operating margin.

Q: On cash pay vs managed care average ticket, and regional differences?

A: Alexander Wilkes says managed care ticket generally higher, cash pay consumer not as resilient post-COVID, but no significant regional differences in strength/weaknesses, planning to use tech stack for tailored assortments by market.

Q: On targeting $75k-$100k cohort, marketing and reaching them?

A: Alexander Wilkes says new campaign focuses on social and digital media for mid-funnel marketing, CRM will be more personalized, progress on dark/dim locations and doctor retention good.

Q: On store closures strategy and demand environment?

A: Christopher Laden says closures rationalize fleet based on profitability, doctor recruitment, and concentration; Alexander Wilkes says cash pay demand environment not back to pre-COVID, but cash pay consumers opting into better products through lifestyle selling.

Q: On comps growth guidance for back half, driving factors?

A: Christopher Laden says prudence due to macro uncertainty, waiting for proof points from CRM and brand assets, and will evaluate next pricing actions after more data.

Q: On pricing, assortment iteration at banners and lens pricing?

A: Alexander Wilkes says assortment changes encouraging, further room to expand, especially with cash pay consumer opt-in; lens pricing has opportunity to be unpacked more in future quarters.

Q: On Ray-Ban and Nuance pilots, early results and rollout?

A: Alexander Wilkes says early results encouraging in ~50 locations, using as test bed to scale with proper training and talk track before full rollout.

Q: On not anniversarying promotion, what promotion and impact?

A: Alexander Wilkes says it was the Wise Buys promotion from last year, chose not to chase that low-end cash pay consumer, pleased with result as cash pay comps positive when aggregating traffic and ticket