Optical retailer National Vision (NYSE:EYE) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 2.9% year on year to $451.5 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.83 billion at the midpoint. Its non-GAAP profit of $0.12 per share was 84.8% above analysts’ consensus estimates.

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“We are encouraged by the progress we are making against key elements of our transformation, including completing the review of our store fleet, implementing new traffic-driving initiatives, continuing to expand exam capacity and remote exam efficiency, and benefiting from new perspectives through our deepened executive bench,” said Reade Fahs, National Vision’s CEO.

Company Overview

Operating under multiple brands, National Vision (NYSE:EYE) sells optical products such as eyeglasses and provides optical services such as eye exams.

Specialty Retail

Some retailers try to sell everything under the sun, while others—appropriately called Specialty Retailers—focus on selling a narrow category and aiming to be exceptional at it. Whether it’s eyeglasses, sporting goods, or beauty and cosmetics, these stores win with depth of product in their category as well as in-store expertise and guidance for shoppers who need it. E-commerce competition exists and waning retail foot traffic impacts these retailers, but the magnitude of the headwinds depends on what they sell and what extra value they provide in their stores.

Sales Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years.

National Vision is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.

As you can see below, National Vision’s sales grew at a sluggish 1.5% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it closed stores and barely increased sales at existing, established locations.

This quarter, National Vision grew its revenue by 2.9% year on year, and its $451.5 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months, an acceleration versus the last five years. This projection is commendable and indicates the market thinks its newer products will spur faster growth.

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Store Performance

Number of Stores

A retailer’s store count often determines how much revenue it can generate.

National Vision operated 1,231 locations in the latest quarter. Over the last two years, the company has generally closed its stores, averaging 1.2% annual declines.

When a retailer shutters stores, it usually means that brick-and-mortar demand is less than supply, and it is responding by closing underperforming locations to improve profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

National Vision’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 2% per year. Given its declining store base over the same period, this performance stems from a mixture of higher e-commerce sales and increased foot traffic at existing locations (closing stores can sometimes boost same-store sales).

In the latest quarter, National Vision’s same-store sales rose 1.4% annually. By the company’s standards, this growth was a meaningful deceleration from the 4.7% year-on-year increase it posted 12 months ago. We’ll be watching National Vision closely to see if it can reaccelerate growth.

Key Takeaways from National Vision’s Q3 Results

We were impressed by how significantly National Vision blew past analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates. That previous guidance was reconfirmed means that the company is on track. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $12.20 immediately after reporting.

Big picture, is National Vision a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.