National Vision, a leading player in the optical retail industry, faces significant challenges with the imminent termination of its Legacy business and the impact of macroeconomic factors. The company’s long-term partnership with Walmart will end on Feb 23, 2024, with severe implications for National Vision. A recorded $60.1 million hit related to Legacy segment goodwill, $9.1 million related to the Walmart contract and relationship intangible asset, and $10.2 million related to property and equipment at Walmart stores and the company’s AC Lens business in 2023 paints a grim picture for the company.
The termination of the Walmart contract spells potential disruption to the company’s business, including a reduction in sales, productivity, and focus. Additionally, escalating inflation is pushing up costs and expenses, adding to National Vision’s woes. The rising prices of raw materials are expected to impact the company’s 2023 costs. Wage investments as a result of inflation and intensifying competition in the recruitment market are further squeezing the company’s profitability.
Tough Competitive Landscape and Increased Costs
National Vision’s heavy reliance on a limited number of vendors and intense competition within the optical retail industry pose serious threats to its growth prospects. The company faces competition from national retailers like LensCrafters, Pearle Vision, and Visionworks, along with the challenge from online sellers of contact lenses and eyewear. The mounting competition in physical retail locations and the booming e-commerce platforms are testing National Vision’s strength in the market.
The company is struggling to combat the surging costs, with wage pressure in certain markets anticipated to persist. Despite these challenges, National Vision remains optimistic in the face of adversity, with four subsegments within Owned and Host consistently gaining market share.
Bright Spots and Strategic Initiatives
Amidst the adversities, National Vision’s subsegments within Owned and Host are progressively gaining market share thanks to various growth drivers. The aging population’s increasing need for corrective eyewear and the steady replacement cycle of eyewear are propelling the company’s revenue. Brands like America’s Best and Eyeglass World are especially driving sales, while the deployment of remote medicine technology is enhancing the company’s capacity and patient experience.
National Vision’s strategic store expansion plans remain on track, with 21 new stores opening during the third quarter and a further 65 to 70 new stores planned for 2023. The new stores opened over the past 12 months are performing well, meeting the company’s expectations in light of ongoing supply chain challenges.
Investor Takeaways
National Vision’s struggles amidst business closures and macroeconomic challenges present a cautionary tale for investors. The company’s ability to navigate these headwinds will be critical to its long-term success. As National Vision grapples with tough competition and rising costs, investors must closely monitor its performance in the coming quarters to make informed decisions.
Disclaimer: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
