Q3 2025 National Vision Holdings Inc Earnings Call
Speaker #2: Good day and thank you for standing by . Welcome to National Visions third quarter 2025 Earnings Call . At this time , all participants are in a listen only mode .
Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during this session , you will need to press star one one on your telephone .
Speaker #2: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one . One again .
Speaker #2: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your first speaker today , Tamara Gonzalez Vice President of Investor Relations and Communications .
Speaker #2: Please go ahead .
Speaker #3: Thank you , and good morning , everyone . Welcome to National Vision's third quarter 2020 earnings call . Joining me on the call today are Alex Wilkes CEO and Chris Wade and CFO .
Speaker #3: Our earnings release issued this morning . And the presentation accompanying our call are both available in the investors section of our website , National Vision Holdings, Inc. .
Speaker #3: A replay of the audio webcast will be archived in the investors section . After the call . Before we begin , let me remind you that our earnings materials and today's presentation include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 .
Speaker #3: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections . These risks and uncertainties include , but are not limited to , the factors identified in the and our filings with the Securities and Exchange Commission .
Speaker #3: The release in today's presentation also includes certain non-GAAP measures . Reconciliation of these release measures is included in our release and the supplemental presentation .
Speaker #3: We would like to draw your attention to slide two . In today's presentation . For additional information about forward looking statements and non-GAAP measures .
Speaker #3: Further , please note that all financial measures in today's commentary are based on a continuing operations basis and otherwise noted . As a reminder , National Vision provides investor presentations and supplemental materials for investor reference in the investors section of our website .
Speaker #3: I'll now turn the call over to Alex . Alex .
Speaker #4: Thanks , Tamara , and good morning , everyone . Thanks for joining us today to discuss our third quarter results . We delivered another strong quarter thanks to our team's intense focus on our transformation initiatives , which are continuing to gain traction and drive positive responses from our customers , energizing our entire organization .
Speaker #4: The third quarter marks our 11th consecutive quarter of positive comp store sales , with adjusted comp growth reaching 7.7% compared to the prior year .
Speaker #4: We drove healthy year over year adjusted operating margin expansion of 90 basis points , supported by higher average ticket . With our refreshed merchandising mix and new selling methods , the momentum we're building across our business is driven by the success of this strategy and approach that we have shared this past year .
Speaker #4: We're growing in areas where we are underdeveloped relative to the category , with a focus on our most valuable customers . While enhancing the patient and customer experience for all .
Speaker #4: Our momentum is evident with the growth we have seen among managed care customers . Our managed care business continues to be very strong , approaching low teens comp sales growth in the quarter , with both positive transaction and ticket trends .
Speaker #4: We are also seeing strong performance in the quarter with the two other high value segments we are targeting progressive lens wearers and outside our customers .
Speaker #4: As we have discussed throughout this year , and we'll discuss even more at our upcoming Investor Day , we're maintaining a strong value proposition while focusing on broadening our target customer , audience , and delivering a healthier bottom line .
Speaker #4: To this end . While at face value , traffic is relatively flat this quarter , we are pleased with the intentional evolution of our customer toward higher value customer segments that we are confident will lead to healthier business overall .
Speaker #4: Managed care , progressive and outside our traffic trends are very healthy , and we're seeing early indicators that our new marketing strategy and CRM platform and in-store selling tools are leading to stronger customer engagement as we continue to execute our initiatives , including making meaningful improvements to our assortment , our messaging , and our selling behaviors .
Speaker #4: We are confident we will strengthen our consumers perception as destination for style and value mix . Although we are just beginning our merchandising transformation , our initial actions are yielding positive results .
Speaker #4: New premium frames like lamb , Ted Baker , Jimmy Choo , Hugo Boss that we recently introduced are turning faster than our expectations .
Speaker #4: The fact that our cash pay ticket is accelerating is a good sign . It means that beyond serving our managed care outside our X and progressive customers with better product , the cafe customer is also opting in to the premium brands .
Speaker #4: We are now offering . And we've seen this response even though we still have the opportunity to improve our lifestyle . Selling techniques , our visual merchandising and product presentation to really showcase our new and exciting products .
Speaker #4: We are also pleased with our initial pilot of meta enabled smart , which we began in 50 stores last spring . Our associates are learning how to sell this unique and highly sought after product , and we're pleased with the consumer uptake .
Speaker #4: We are seeing given the traction we have experienced . We are excited to roll out meta to an additional 250 locations during the fourth quarter .
Speaker #4: As we look ahead to the remainder of the year , we will continue to evolve our assortment mix and are on track to have approximately 40% of frames in our stores priced at or above $99 by year end , up from approximately 20% this time last year .
Speaker #4: When it comes to our pricing architecture , it's important to keep our journey in mind . When we took our first pricing actions last year , we talked about no regrets , pricing , and we successfully delivered on these actions .
Speaker #4: We are now looking toward a more sophisticated era of pricing , where we consider factors like lens components , managed vision , care packages , and targeted discounts and offers in our pricing construct .
Speaker #4: Our pricing playbook is architected on a thoughtful plan rooted in consumer response and data , and we have our next series of pricing actions already mapped out in the fourth quarter .
Speaker #4: We're taking our next set of pricing actions on lenses , lens add ons , and our bundle offer . We are also modernizing our bundled pricing .
Speaker #4: We're moving from 89.95 to a clean and simple $95 price point for our offer . This is a result of listening to our customer feedback that our price points felt dated .
Speaker #4: Just as we are evolving our assortment to fit the needs of the customers , shopping in our stores . Our price points must evolve as well as we continue to take pricing actions , we're being mindful of our customers response by measuring KPIs around conversion and NPS , both of which remain healthy as hopefully you have seen , we have made a significant transformation to evolve how we are communicating with our consumers .
Speaker #4: During the third quarter , we launched our new everyday deserves Better campaign for America's Best , which has energized our 13,000 plus team members and is clearly resonating with customers .
Speaker #4: We are really excited with the response to our new campaign , which has resulted in a significant increase in unaided awareness in the third quarter .
Speaker #4: This new campaign was launched almost simultaneously with our new CRM platform , which is also showing positive inflection with consumer engagement . Beyond engagement , the platform is enabling greater operating efficiency and more personalized solutions with tangible results and increased number of exam scheduled and higher customer reactivation rates .
Speaker #4: During the third quarter , we launched our first journeys targeting lapsed customers . Those customers who have not returned during their typical purchase cycle .
Speaker #4: One month into launching lapsed journeys , and we are seeing significant improvement in click through and open rates . Looking ahead , future journeys plan include Post-exam , loyalty and scheduler journey , which are all about making sure people show up for their booked exams .
Speaker #4: We plan to learn from our initial work as we evolve into developing those initiatives intended to improve appointment show rates , as these are the most sensitive and business impacting journeys over the next several quarters .
Speaker #4: Overall , I'm extraordinarily pleased with the urgency and progress we've made and a relatively short time to modernize our marketing approach , both in messaging and technology enablement , along with advancements in marketing , we are also continuing to enhance the digital tools and capabilities for our store associates .
Speaker #4: Earlier this year , we introduced digital selling tools that help our associates to visually explain complicated lens benefits like Progressive's and transitions to our customers .
Speaker #4: This tool has been impactful in pilot stores, allowing a more seamless and elevated experience for customers to ensure they get the product they most want and need.
Speaker #4: It will also be used for pricing demonstrations to explore various frame and lens combinations , and help demystify the customer journey beyond educational and product demonstration features , associates will be able to take digital measurements , offering a more precise outcome versus our historical manual approach .
Speaker #4: All America's Best and Eyeglass World locations are expected to have this technology live in store before the end of the year . Having capabilities like this , combined with our new lifestyle selling approach , will be a game changer for our stores and the improvements we are making are being enthusiastically embraced by our store teams .
Speaker #4: During the quarter , we saw sales gains in premium add ons like superior progressive Lenses and anti-reflective coatings . Behavior change is happening and ongoing associate adoption of lifestyle selling is certainly contributing to our results .
Speaker #4: Our doctor coverage remains healthy and stable , supported by innovative recruiting and retention strategies . We're seeing our best doctor retention numbers in recent memory , and we've once again successfully recruited over 10% of the entire graduating optometry class .
Speaker #4: Our remote exam technology continues to provide additional capacity flexibility . A remote hybrid pilot where in-store doctors perform exams and other stores is progressing well with more in-store doctors now trained to perform remote exams and other locations .
Speaker #4: Looking ahead , we have tremendous opportunity . We are pleased with the progress we're making on SG&A leverage , our cost optimization has given us flexibility to drive our expansion even as we face higher health care expenses than planned .
Speaker #4: Chris will go into more detail on how we're mitigating healthcare expenses going forward . We are well underway with our broader cost optimization efforts .
Speaker #4: This is a hyper focus for the organization , and we will be sharing more at our upcoming Investor Day . We're confident in our transformation strategy and the multiple years of runway ahead for continued growth .
Speaker #4: Our focus on higher value segments , enhanced product assortment , and marketing , and in-store selling approach continues to deliver results . Our investments are strategically placed to strengthen our market position and create long term shareholder value .
Speaker #4: We remain focused on our core mission of helping people see their best to live their best through exceptional eye care and the modernization work we're doing across technology , branding and operations is just at the beginning of our commercial model evolution .
Speaker #4: I look forward to sharing more details about our strategic vision and long term growth opportunities at our November 17th Investor Day . I want to take a moment to thank our team for their exceptional dedication , focus and execution toward delivering an exceptional Q3 and year to date .
Speaker #4: And with that , I'll turn it over to Chris to review our financial results . Chris .
Speaker #5: Thank you , Alex , and good morning , everyone . As Alex shared the disciplined execution of our strategic initiatives is reflected in our strong third quarter performance .
Speaker #5: These results continue to reinforce our confidence in the multiyear growth opportunity ahead . I believe the consistent performance we have delivered over the past year serves as a compelling validation of our ability to deliver on our stated objectives and drive sustainable results .
Speaker #5: Now , I'll turn to our third quarter results as compared to the prior year period . Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures .
Speaker #5: For the third quarter , net revenue increased 7.9% , driven by adjusted comparable store sales growth of 7.7% and growth from new store sales .
Speaker #5: The timing of unearned revenue negatively impacted revenue in the period by approximately 80 basis points during the quarter . We opened for new America's Best Stores and closed two Fred Meyer stores .
Speaker #5: We ended the quarter with a total of 1242 stores . Adjusted comparable store sales growth in the period was driven by an increase in average ticket of 7.1% , which reflects a combination of price increases implemented in Q4 and Q1 , as well as the benefit from our refreshed merchandising mix and new selling methods .
Speaker #5: Overall , customer transactions were relatively flat compared to the prior year , as healthy trends in our managed care business continued to offset softer traffic in our cash pay business .
Speaker #5: As a reminder , last year we ran promotions targeted at cash pay consumers in Q3 that we chose not to anniversary this year , our eye exam conversion to product sales has remained consistent with prior quarters , which is a key indicator of customer acceptance of our merchandising and pricing transformation .
Speaker #5: As a percentage of net revenue costs applicable to revenue decreased approximately 40 basis points . The resulting increase in gross margin is driven by our growth in average ticket and leveraging our optometrist related costs .
Speaker #5: We expect gross margin to expand slightly for fiscal 2025 . Adjusted SG&A was $242.3 million in the third quarter , and as a percentage of revenue leveraged ten basis points despite ongoing headwinds in healthcare costs that many companies like ours are experiencing better leveraging our SG&A remains a primary focus for the organization , and we remain on track to leverage adjusted SG&A .
Speaker #5: This year . Additionally , we will share more about the multiyear cost optimization opportunities we are pursuing at our Investor Day . Adjusted operating income was 19.8 million , compared to 14.3 million in the prior year period .
Speaker #5: Adjusted operating margin increased 90 basis points to 4.1% in the quarter . Net interest expense was 4.1 million , same as the prior year period .
Speaker #5: Adjusted EPs increased to $0.13 per share in the third quarter of 2025 , from $0.12 per share a year ago . For the year to date , fiscal 2025 , we delivered adjusted comparable store sales growth of 6.4% , supporting adjusted operating income , margin , expansion of 120 basis points , and nearly 18% growth in adjusted EPs compared to the prior year .
Speaker #5: Turning next to our balance sheet , we ended the period with a cash balance of approximately 56 million and total liquidity of 349.6 million , including available capacity from our revolving credit facility .
Speaker #5: During the quarter , we repaid 15 million of the borrowings outstanding under our revolving credit facility , bringing the balance to zero year to date , we have repaid 94.7 million in debt and convertible notes , bringing our total debt outstanding , net of unamortized discounts , to 253.4 million at the end of Q3 .
Speaker #5: For the trailing 12 months , we ended the period with a net debt to adjusted EBITDA of 1.1 times year to date . We generated operating cash flow of 133.1 million , an invested 48.4 million in capital expenditures , primarily driven by investments in new and existing stores and information technology .
Speaker #5: We continue to maintain a strong balance sheet and healthy cash flow to support growth and capital allocation priorities. Moving now to our outlook, we are very pleased to be in a position to raise our expectations for the year.
Speaker #5: We now expect revenue of 1.97 to 1.99 billion , adjusted comparable store sales growth of 5 to 6% . Adjusted operating income of 92 to 98 million , and adjusted EPs of $0.63 to $0.71 , which assumes approximately 81 million weighted average diluted shares outstanding .
Speaker #5: As a reminder , this outlook incorporates the benefit of the 53rd week , which we estimate will add approximately 35 million of net revenue and approximately 3 million of adjusted operating income for the year .
Speaker #5: Our adjusted comparable store sales growth is calculated on a 52 week comparable basis to the prior year . As Alex mentioned , we are in process of executing our Q4 pricing updates in line with our multi-year pricing strategy playbook .
Speaker #5: These pricing actions are factored into our full year guidance . We have been closely monitoring consumer response to the merchandising and price framework .
Speaker #5: We've implemented to date , and have seen consistent conversion in NPS rates . We confident that we can continue to evolve our assortment and pricing architecture in a way that remain drives value for our consumers and our investors .
Speaker #5: As we discussed , we continue to see strong traffic for managed care customers , offsetting a decline in cash . Pay traffic . We continue to guide for traffic trends to be similar to what we've seen year to date .
Speaker #5: Disciplined cost management remains a primary focus for the organization , and we are excited about the projected operating margin expansion presented in our 2025 guidance .
Speaker #5: Our outlook includes the cost out actions we've discussed in prior quarters , as well as other cost mitigation actions to offset headwinds in health care costs and our investments in associate variable incentive programs .
Speaker #5: As we continue to reward the team for exceeding their plan and drive behaviors , contributing to our top line performance , we expect improved leverage on incentive compensation in the future as these behaviors become the new baseline .
Speaker #5: For clarity , our outlook continues to include the anticipated impact of tariffs , which are not materially changed from prior quarter's guidance . Now , turning to our expectations for capital expenditures , we reduced our guide for CapEx to 80 to 85 million .
Speaker #5: This change is largely driven by investments in certain projects that have shifted into fiscal 2026 . We remain on track to open 32 new stores during fiscal 2025 , including planned closures for the year .
Speaker #5: We now expect to open nine net new stores in 2025 . This includes 21 America's Best stores open through the end of Q3 at an expected 11 openings in Q4 .
Speaker #5: In addition to new stores , we expect to close 23 stores in total this year . Related to both our fleet optimization as well as overall disciplined fleet management .
Speaker #5: This includes four store closures expected in Q4 for all other details regarding our outlook , please refer to today's press release . And with that , I would like to thank you for your participation in today's call .
Speaker #5: Operator . We are now ready for questions .
Speaker #2: Thank you . At this time , we will conduct the question and answer session . As a reminder to ask a question , you will need to press star one one on your phone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one . One again . Please stand by while we compile the Q&A roster . Our first question comes from Michael Lasser of UBS .
Speaker #2: Your line is now open .
Speaker #6: Good morning . Thank you so much for taking our question . You've been making a lot of changes over the last year or so , especially with respect to merchandising .
Speaker #6: The assortment . What signals are you looking for to ensure that you're not going too far ? And it would only come to light too late .
Speaker #6: And when do you think traffic will inflect ? Is that something that we can we should reasonably expect within the next couple of quarters ?
Speaker #6: Thank you so much .
Speaker #4: Thanks , Michael , and good morning . Yeah . So as it pertains to merchandising , we're really happy with the changes that we've been made that have been made to date .
Speaker #4: We're monitoring NPS . We're monitoring conversion rate from exam to purchase to ensure that we're not pushing too far . But we do think we have really a long way , yet still to go .
Speaker #4: You know , a couple signs that we're incredibly encouraged by . One is that our cash pay consumer , the one that we've historically thought is the most sensitive , they're actually adopting some of our higher price point items at a higher clip than we additionally , than we initially anticipated .
Speaker #4: That's both on the frame side and the lens side . We're seeing inventory turns of our higher , higher value frames that we've just introduced .
Speaker #4: Actually exceed our expectations . So we think that's a really good sign as well . And those are data points that come through in real time .
Speaker #4: So you know from an early innings and our our merchandising evolution strategy , all signs are still pointing to a very , very positive response rate to what we're to what we're up to in terms of traffic inflection , you know , we have seen traffic inflection where we have intended to see it on the managed care customer on the outside , our customer and on the progressive , where , you know , we're certainly pleased with the inflection and traffic that we're seeing driving those customers into our stores .
Speaker #4: It was a very intentional approach on behalf of the team to to do that . But , you overall traffic remains flat as a cash pay consumer .
Speaker #4: You know , remains a little bit depressed . So again , overall , I just couldn't be happier with with all the signals we're seeing in the business .
Speaker #6: Thank you very much for that . My follow up question is , given the pricing that you're going to take in the fourth quarter , as well as what you will have yet to lap from what you've taken earlier this year , if all else remains equal , what would be the contribution from pricing ?
Speaker #6: If nothing else happens ? As you look towards 2026 just so we can get a sense of what the embedded comp already is in the model .
Speaker #6: Thank you .
Speaker #4: Yeah . Thanks , Michael . Great question . So we are lapping our price actions from last year . Call it in the mid November time period .
Speaker #4: We made some additional changes to the promotion in Q1 of this year . So the pricing actions that we're taking in Q4 , albeit a different character than what we did last year , remember , we did frame pricing and we took some changes to the to the base offer .
Speaker #4: This year . We're evolving it to be a bit more surgical . Again , around around lenses , lens packages . We're changing the offer to be a bit more modern .
Speaker #4: As I like to say around here , we're retiring the decimal points to modernize our price points . So but largely we believe that our pricing actions will yield around the same contribution in 26 as they've yielded in 25 .
Speaker #6: Thank you very much and good luck .
Speaker #2: Thank you . Our next question comes from Simeon Gutman of Morgan Stanley . Your line is now open .
Speaker #7: Hey . Good morning . Thanks for taking my question . A follow up to the prior one . First , you mentioned some of the pricing changes for 26 center on contact lenses .
Speaker #7: It seems like that category may be a little more commoditized . Correct me if I'm wrong . So where do you sit versus peers or brands at this point ?
Speaker #7: And how much leeway can you have ? And then to put words in your mouth , you said the pricing benefit may look similar to 2025 .
Speaker #7: Is the ticket lift that we saw this quarter . I think around seven . Is that the right proxy for 26 ? Thanks .
Speaker #4: Yeah , great . On contact lenses . So we're we're actually taking some pricing actions on ophthalmic lenses . And we will be taking some pricing actions on contact lenses .
Speaker #4: Go forward . You know , one of the things that's been a historic truth for our business , as we see cost increases come through from the contact lens vendors .
Speaker #4: We typically pause for about a quarter or so until we take pricing on contact lenses , just to see how the market responds .
Speaker #4: Because to your point , it is a more commoditized , more shoppable product in our category . So there generally is about a quarter delay between the time we get cost increases from vendors and when we take our pricing actions to the consumer .
Speaker #4: But we're always really mindful of how we're positioned , especially versus the online versus the online channel . You know , as it pertains to ticket evolution throughout , you know , overall , 26 , you know , we think of our ticket evolution really in three components .
Speaker #4: There's a pricing component . There is an assortment mix component . And there's also a consumer mix component that drives our ticket as well .
Speaker #4: Right . As we're driving more outside our more progressive , more managed care customers , those consumers tend to have a higher purchase value when they shop with us .
Speaker #4: So really you have to deconstruct our our , our average ticket growth along those , those three components . We're going to share more about our long term algorithm on the 17th and share some more of the details , specifically where we'll where we'll showcase where we're underdeveloped and where we think that can continue to grow over a multiyear time horizon .
Speaker #5: Yeah . And just one data point for you . Asked about the Q3 run rate . Just keep in mind that we're laughing .
Speaker #5: A promotion from last year , which kind of gave us some additional upside to average ticket Q3 this year versus Q3 of last year , which we don't think will will replicate again in 2026 .
Speaker #7: Okay , and then follow up . This is maybe preempting the Investor Day a little . So respect , you know , maybe a less of an answer .
Speaker #7: The flow through of the business if you're going to if the business is going to comp call it mid-single digits for the foreseeable future .
Speaker #7: Are you spending into it? Sounds like there's some advertising and other things you can spend, and flow-through comes in outer years.
Speaker #7: Or should there be proportional flow through as the comps accelerate here ?
Speaker #5: Yeah . it's a great question . Look , I think we're super pleased with the year to date operating margin expansion of 120 basis points this year .
Speaker #5: I'll tell you that as a as a focus area for this management team , operating margin expansion remains a primary focus kind of year over year .
Speaker #5: We are definitely investing back into the business to bring some of these strategic initiatives and transformation to life , but we believe we can do so while continuing to drive positive operating margins .
Speaker #7: Thank you very much. Good luck.
Speaker #2: Thank you . Our next question comes from Robert Ohmes of Bank of America . Your line is now open .
Speaker #8: Hey , Alex . Hey , Chris . Thanks for taking my question . Not to front run the analyst Day either , but can you give some color on what market share trends look like from your perspective , both on a volume and us dollar basis ?
Speaker #8: Are you guys are you guys gaining share on both the dollar ? Obviously on a dollar , I would expect you are . But on a on a unit basis as well .
Speaker #4: Hey Rob great question . Thanks so much . Yeah . So we actually do believe we're getting share on a volume basis as well .
Speaker #4: So we look at the vision Council data that gives a good indication for what exam growth is in the category . And we have been outstripping that through kind of year to date .
Speaker #4: So we do believe we are gaining share on a customer account basis .
Speaker #8: And then my follow-up question is, can you guys give a little more color on the, you know, the cash pay customer?
Speaker #8: You know , are you it's interesting that you're seeing them trade up , but is that what are you seeing there . And are you seeing any kind of changes that you could see .
Speaker #8: You know, growth in that cohort? Again?
Speaker #4: Yeah . No , we're I'd say , you know , three things related to the cash pay consumer . We are seeing ever so slight acceleration in the purchase cycle that we think is an encouraging sign on the on the ticket evolution perspective .
Speaker #4: We are seeing them , like I said , opt into higher frames , higher end frames at a at a rate that was much above what our expectation was when we started to make some of these changes .
Speaker #4: Right when we when when we started to make assortment changes early on , you know , we thought that these were going to be more significantly impacting to the managed care customer , the managed care consumers .
Speaker #4: Absolutely have responded well . But the really pleasant surprise has been the cash pay consumer . That's also opting in to our more our more premium frames .
Speaker #4: The third component is I'm super pleased with some of the advancements we've seen as we've started leaning into more premium lens sales . We're seeing the cash pay consumer also opt into a higher degree of of of anti-reflective of transitions , and a more premium progressive lenses .
Speaker #4: So the uptake there with the cash pay consumer has also been super healthy . One additional point just to note is that there is absolute growth in the managed care consumer over the cash pay cohort .
Speaker #4: So, it actually has the cash pay cohorts becoming managed care customers as the managed care category grows, in general, by somewhere in the rate of 2% per year.
Speaker #4: So again , I think our strategy has been working super well for managed care consumers and for where the cash pay customer is , you know , we're also super pleased with the progress being made there .
Speaker #4: .
Speaker #8: That sounds great . Thanks so much .
Speaker #2: Thank you . Our next question comes from Brian Tanquilut of Jefferies . Your line is open .
Speaker #9: Hi , this is Cameron on for Brian . Can I dig a little bit more into the cash pay consumer ? You guys said you're gaining share .
Speaker #9: So it almost sounds like it's not people switching to other providers , but it's just the cash pay consumer base as a whole in the industry .
Speaker #9: Are you seeing any losses to other competitors or do you think it's just like a pause and demand that you expect to re-accelerate in the future ?
Speaker #4: Yeah , again , kind of just double clicking on that . We actually do think we are . We are taking share from the category , and I can't speak to specific retailers or competitors that we could be seeing some , you know , movement between .
Speaker #4: But on a category basis . We are share takers based on the data that we have at our fingertips . But that's that's , you know , true for both the cash pay and the managed care consumer .
Speaker #4: Right . This is the consumer group in general . You know , the the I think that the thing that's true across the categories , there is still a a delayed purchase cycle of the cash pay consumer .
Speaker #4: I'd say our data point that , you know , months between purchase is still depressed is a true one for for the category .
Speaker #4: And you know , as we've talked about at length over many , many of these calls , you know , at some point that that has to accelerate as we burn through , you know , the purchases of consumers that that were made in the kind of post Covid era .
Speaker #9: Thank you . And then , just as a follow up , thinking about pricing actions in Q4 , that price increase to $95 for an exam that's going to hit in Q4 , correct ?
Speaker #4: That's correct . Yeah , that's going to be rolled out . I'm on November . Call it the weekend of November 15th , November 16th is when that will go live .
Speaker #9: Okay . Thank you very much .
Speaker #2: Thank you . Our next question is from Paul Lajoie of City . Your line is now open .
Speaker #10: Hey . Thanks , guys . I'm curious if you could talk about what's happening on the competitive front from a pricing perspective . And if you're seeing anything today on that , on the pricing side , that different than what you were thinking three months ago ?
Speaker #4: Yeah . So in terms of category pricing , you know , our category scan would indicate that the category is generally growing on price versus on exam growth or customer count growth .
Speaker #4: And I think that's been a true statement for the last five years . And I think historically , you know , we've we've shared that national vision has not kept up with the market in terms of price evolution .
Speaker #4: And we are certainly using this as an opportunity now to to close that gap . We still believe at our core that we are going to be the destination for value in the category , right ?
Speaker #4: We are not looking to match some of the more premium price priced competitors in the market , but we are certainly closing the gap versus versus some of the actions that they have taken over the past five years .
Speaker #10: And also curious if you could speak to any regional differences that are noteworthy .
Speaker #4: Generally , not so much . I mean , the category . Doesn't really experience a ton of regional price discrepancy , at least from a from a chain retail perspective .
Speaker #10: Thank you . Good luck .
Speaker #2: Thank you . Our next question comes from Kate McShane of Goldman Sachs . Your line is open .
Speaker #11: Hi . Good morning . Thanks for taking our question . We were curious about two things . One , with regards to just new customer acquisition , is there anything more there that you can tell us about how many new customers you're acquiring that are walking through the door for the first time , and just what the brand awareness scores may have changed or how they've changed since the brand relaunch that you've had .
Speaker #11: And then our second unrelated question is just with the change in CapEx , is there anything meaningfully changing with projects that you're pursuing in 25 versus 26 ?
Speaker #4: Yeah . Okay . Thanks for the questions . I'll take the first ones and then Chris can take the CapEx ones as it pertains to traffic .
Speaker #4: We're seeing traffic growth in the low teens for managed care outside our exit . Progressive wears . So again , from our traffic driving initiatives , that's where we're seeing and that's where we've pointed our our assets to drive growth with the brand relaunch .
Speaker #4: Excuse me with the brand relaunch in the third quarter , we're super , super happy with our with our growth in an unaided brand awareness .
Speaker #4: Since we've launched a new campaign , we've actually seen some of our best scores to date . We've seen unaided brand awareness grow around 19% .
Speaker #4: We've seen brand consideration up about 10% , and our overall creative copy has scored better than our ads in recent memory . So again , in terms of things that give us a whole lot of confidence in our direction , the leading indicators of our new campaign resonating with consumers .
Speaker #4: Again , we just could not be happier with the results . And we couldn't be happier with the early indicating scores that we've seen on our on our campaign assets .
Speaker #5: Yeah . And on the CapEx front , the the decrease in our guidance for capital really just comes from a timing perspective . We're we're not investing any less than the strategic initiatives that we anticipate investing in .
Speaker #5: It really just becomes a matter of timing that the bills will be paid . Shifting into 2026 versus Q4 of this year .
Speaker #11: Thank you .
Speaker #2: Thank you . One moment for our next question . Our next question comes from Matt Koranda of Roth Capital . Your line is now open .
Speaker #10: Hey , guys . Thanks . Just wanted to see if you could break down the lens pricing actions that you referenced earlier in a little bit more detail .
Speaker #10: Is that going to be on basic ophthalmic lenses or more specialized lenses like progressives and coatings ? And I guess how would those actions impact out-of-pocket spend for managed care customers ?
Speaker #4: Yeah . Great question . So we're taking this is going to be an era of much more surgical increases , right . Because lens pricing is a is a is a much more complicated endeavor .
Speaker #4: We are taking some price changes on some coatings . We are taking some price changes on our lens materials in light of some planned reimbursement rates .
Speaker #4: So we're considering how plans pay and what the division is between plan pay versus member out-of-pocket and our lens pricing architecture.
Speaker #4: So those are really the areas of focus . So when I talk about our lens playbook evolving the the no regret actions , we've taken previously have been more of the kind of straightforward , obvious , 101 level stuff .
Speaker #4: And now we're graduating into 201 pricing architecture with an optical . .
Speaker #10: Okay . Makes sense . And then my follow up , I guess , is if I look at the fourth quarter , implied comp , even if I'm sort of looking at the higher end of the guide , I guess it's in the mid 4% range , which would be a bit of a deceleration from the third quarter growth rate .
Speaker #10: Is that actually what you guys have observed in October ? Just wanted to hear a little bit more color on sort of what you're seeing on the ground level .
Speaker #12: Yeah , I think in Q4 we haven't seen anything that would .
Speaker #5: Take us off of our guide . You know , we we did just a reminder from a Q3 perspective , right ? We're lapping our promotion .
Speaker #5: So as you think about the run rate from Q3 to Q4 , we should see some deceleration in comp driven by that . You know , from a consumer sentiment perspective , I think we're remaining pragmatic about what is our customer sentiment to open their wallet in Q4 , given just some of the macro uncertainty , especially around the holidays .
Speaker #2: Thank you . One moment for our next question . Our next question comes from Anthony Chukumba of Loop Capital Markets . Your line is now open .
Speaker #13: Good morning . Thank you so much for taking my question . I guess my first question you talked about the the new America's Best advertising campaign , which I yeah , I've seen it a lot .
Speaker #13: It's a vast improvement . I don't I don't miss hourly . I believe that's his name but was and you also talked about taking price in America's Best , was just wondering what your plans are for Eyeglass World in terms of a new advertising campaign .
Speaker #13: And also potentially , you know , raising the opening price point ?
Speaker #4: Anthony , thanks for that one . One of my favorite topics recently with our management team , actually . So as we have just kind of cleared the the work with America's Best .
Speaker #4: And just to be clear , there's there's a lot more to do . Right . And in terms of marketing evolution , we've nailed the the campaign assets that we feel we feel just so great about .
Speaker #4: There is more work to do on the media side on America's Best . You know , historically , I've talked about we needed to re-architect our brand campaign and messaging so that we could have assets that work better in mid-funnel media .
Speaker #4: We now have that. So, we're turning our attention a bit to how we invest in the media going forward in America's best.
Speaker #4: But we're turning our creative teams onto an eyeglass world . Replatforming . So I would look to that as a 26 initiative . Our eyeglass world general manager is going to share a little bit more color on that .
Speaker #4: On the 17th . But we do plan on on taking a similar approach to what we took in America's Best for Eyeglass World in 2026 .
Speaker #4: That being said , we are really , really happy with the early success that we're seeing at Eyeglass World . Eyeglass world is comping , you know , in the mid-single digits for the first time in quite some time .
Speaker #4: And that's been on the on the back of some assortment evolution and some price evolution at Eyeglass World , taking out of the America's best playbook .
Speaker #4: So we're borrowing from the America's best playbook . We haven't fully yet rolled it out , but we're seeing some really nice early wins within the world .
Speaker #4: Brand .
Speaker #13: Got it . That's really helpful . And then just my second question , a quick one . Just in terms of men's vision care penetration .
Speaker #13: I know it was 40% for a while last quarter . I believe you said it was 50% . It was just wondering if you had any update on that .
Speaker #13: Thank you .
Speaker #4: Yeah . So go managed care penetration is growing . Like I said , it's been growing in in the the low double digit rate , you know for the past quarters .
Speaker #4: And we're still on that trend. Yeah, we.
Speaker #5: I think what we had said previously is that our North Star was 50% , not that we were at 50% just yet , but yeah , we we entered the year around the 40% penetration mark .
Speaker #5: And we do see that growing as part of that , that journey to 50% .
Speaker #13: Got it . Thank you so much . I'll see you guys in New York .
Speaker #5: See you soon .
Speaker #4: Thanks , Anthony .
Speaker #2: Thank you . Our next question comes from Dylan Cardin of William Blair . Your line is open .
Speaker #5: Thank you .
Speaker #14: Curious if you could unpack kind of the puts and takes in the gross margin for the quarter and maybe specifically kind of some of those comments around the leverage on optometrist costs and what to expect , perhaps from a rate of change standpoint , as you raise your teaser price and then kind of related , you how you're thinking about availability of doctors .
Speaker #14: Now that we're kind of in a more stable market , go forward relative to your scale . Thanks .
Speaker #15: Yeah , I think we were excited about our gross margin expansion in Q3 , as we saw .
Speaker #5: Neutral traffic and increase in average ticket . Just as you kind of think through the operational impact of that , we we're generating more value per customer with that necessarily needing to put more doctors in lanes .
Speaker #5: So we did see some improved leverage there , which , you know , we're . Even more excited about is Q3 is a large hiring quarter for us .
Speaker #5: So generally , we bring on a lot of doctors that are not as productive as they're onboarding with us . In terms of kind of long range opportunity , I think it's an area for us to continue to focus on as we drive focus both on average ticket and traffic .
Speaker #5: We're remaining laser focused on how do we drive efficiency in the doctor spend line , as well as other areas of SG&A . ?
Speaker #4: And then , Dylan , just , you know , a couple sound bites on overall doctor recruiting and doctor availability . I'm pleased that this is a topic that is a management team .
Speaker #4: We're not having to have a whole lot of discussion about at the moment . Right ? We're super pleased with we're accomplishing from a from a recruiting perspective .
Speaker #4: You know , we don't necessarily see a lot of of risk or challenge from a from a dark store perspective . So it's a topic that again , full credit to the to the organization for the last few years for what's happened from a remote capacity , remote capability perspective from a hybrid capability perspective , from dialing up our recruiting efforts .
Speaker #4: And , you know , landing the right messages so that we can recruit over 10% of the graduating class every year . So , again , it's a , I think , a great progress that's been made over the last few years that we're now continuing to benefit from .
Speaker #14: Thank you . And I don't know how much you can speak to this , but Essilor has put up some pretty large numbers as it relates to the meta glasses .
Speaker #14: Any any comment you kind of have about the opportunity current business , anything really ?
Speaker #4: Yeah . I mean , the our our bullish notion on it is , you know , similar to the premium frames turning at at or above our expectations .
Speaker #4: We've seen great performance with meta in the first 50 pilot locations that we rolled out again exceeding our expectations . And as I've talked to my my pals at Luxottica , they'd say that in the 50 stores that we've launched , our our turns in sell through is among the best that they've seen globally .
Speaker #4: So we're really happy with our first kind of entree into the smart glass arena . Hence our plans to scale it to an additional 250 stores .
Speaker #4: You know , as as rapidly as possible .
Speaker #14: Awesome . Appreciate it . Thank you .
Speaker #2: Thank you . Our next question comes from Adrienne Yih of Barclays . Your line is now open .
Speaker #16: Great . Thank you very much . It's great to see the progress on all the initiatives . Alex . I guess my first quick question is the trends that you saw throughout the quarter .
Speaker #16: I'm imagining they sound like they're pretty consistent from back to school through end of quarter and into current day . Also , are you seeing the cash pay consumer , the target household income is edging upwards in any way to suggest that they're a little bit becoming more resilient to kind of price increases and kind of along those lines , what advertising or acquisition strategies are you using to engage this MC customer to get them into the exam room and to bring them in-house ?
Speaker #16: Thank you .
Speaker #4: Great . Thanks , Adrienne . Great , great question . You know , we didn't see much kind of variation throughout Q3 . I think the character of our sales July , August , September were roughly all kind of in line in similar .
Speaker #4: So so not a whole lot of variability there . And as Chris mentioned , you know , in October , we haven't seen anything that would would signal a difference in our , in our guide or in our performance .
Speaker #4: What we're doing , you know , from a acquisition perspective against the mid sorry , against the managed vision care consumer is specifically activating a bit better mid funnel .
Speaker #4: You know we're spending a bit more in social . We're spending a bit more in display . We're shifting our our media out of .
Speaker #4: Overall kind of you know broad TV advertising into more digital assets . So you know , if you think about , you know , historically , you know , we've probably spent 60% of our of our media budget on linear .
Speaker #4: We're beginning to pull that down and invest that in more targeted digital assets . So , you know , think of your your YouTube's YouTube TV , Hulu , etc.
Speaker #4: , where you can be much , much more targeted to a specific consumer and a consumer cohort . So this is going to be a continued evolution for us .
Speaker #4: You know , from a from a company that was historically spending the vast majority of our advertising on linear and in search that we're now , you know , entering into spending more mid-funnel where we can be more targeted .
Speaker #4: But that's that's certainly going to be part of our , our media evolution in 26 .
Speaker #16: Okay . And then does that because of that target where you're going . Does that necessarily mean that you're acquiring that managed care customer at an earlier age ?
Speaker #16: At the beginning of their career , perhaps .
Speaker #4: What it means is we are acquiring the managed care consumer when either they become insured for the first time, and we are talking to managed care consumers that maybe historically we weren't in their consideration set.
Speaker #4: And I think one of the things we've we've learned is that , you know , our , our historical message of two pair of eyewear for , you know , X price with an eye exam was a very compelling message to the cash pay consumer .
Speaker #4: But it didn't necessarily speak to the managed care consumer because they knew they were covered by an insurance benefit . So the notion of an included exam didn't resonate as strongly with them .
Speaker #4: So being able to shift and change our messaging in a way that's more targeted to that consumer specifically , I think we now have the opportunity to reinforce with them that we actually are an obvious brand destination for them , when historically they might not have even had us in their consideration set .
Speaker #16: That's super helpful . Color . And then for Chris to kind of model , I guess modeling ones in terms of the health care costs , obviously they're kind of limiting flow through in the third quarter .
Speaker #16: Was that kind of like was that kind of a step up in the health care costs ? How much are those up year on year ?
Speaker #16: And then on the incentive compensation , same thing . You typically I guess you get some accruals in the back half of the year .
Speaker #16: Third quarter . Fourth quarter . So just the timing of when we'll see some maybe less pressure on the incentive comp accrual . Thank you very much .
Speaker #5: Yeah . Great questions on the health care cost front . That's been something that's that's been going to burden in the PNL . Each quarter year to date .
Speaker #5: Q3 was a little bit more disproportionate in terms of the magnitude of impact. And our guide does assume that that continues into Q4 in terms of the variable incentive compensation.
Speaker #5: That's really something that we'll see kind of rebalance as we get to 2026 planning and guide . We think we're we're adequately accrued for business performance , inclusive of what's in our guide .
Speaker #5: So while it we'll be again , it said simply it's in our guide that this Stip accrual or short term incentive accrual remains consistent with what we've seen year to date .
Speaker #5: And again , it's an area that we're making intentional investments . And rewarding the team for driving these behavior changes . But again , as those behavior changes become run , the business , we do expect to see leverage in 2026 .
Speaker #16: No , we love to see incentive comp go up . So that's always a good thing . So thanks so much . We'll see you in in a couple of weeks next week .
Speaker #16: See you soon . Thanks .
Speaker #2: Thank you . Our next question comes from Zachary Fadem of Wells Fargo . Your line is now open .
Speaker #17: Hey . Good morning everyone . This is David Lance on for Zach . Thanks for taking our questions . So you're still on track to open 30 new 32 new stores this year ?
Speaker #17: Curious if you can walk through the new store . Economic model as it stands today and provide any color around openings for 26 .
Speaker #5: We'll share more details on our 26 openings at our Investor Day . In terms of new store economics , really know material shifts in terms of what we've previously communicated .
Speaker #5: As we're thinking about long term evolution of the model , right ? As we contemplate things like new store formats and some of the infrastructure that we're building from a marketing and CRM perspective , we do expect over time that these infrastructural investments will help us accelerate our ability to break even in new stores .
Speaker #5: But we're still in the early innings of , of observing the data coming back from these initiatives to be able to model that in .
Speaker #17: Got it . That's helpful . And then can you talk about the ramp of remote in a bit more detail and where penetration sits today ?
Speaker #4: Yeah , penetration of remote . You know , we are north of 70% of our locations . Are are enabled with remote . We are scaling remote to a handful more eyeglass world locations in context of the doctor model .
Speaker #4: Switch out that we just executed in the third quarter in Florida . We are deploying it in the markets that we have that we can deploy it .
Speaker #4: But I think we feel , you know , again , we feel great about the penetration where we are and the investments that we've made to date .
Speaker #4: And you can start to see , you know , a , a I guess , more moderate pacing because we're at our saturation rate that we were hoping to achieve .
Speaker #5: Yeah . And just a reminder for the group , due to state regulatory constraints , we cannot deploy remote in all of our stores .
Speaker #5: It's kind of a state by state . Consideration .
Speaker #17: Thanks .
Speaker #2: Thank you. I am showing no further questions at this time. I would now like to turn it back to the CEO.
Speaker #2: Alex Wilkes for closing remarks.
Speaker #4: Great . Thanks so much everyone for the thoughtful questions and thanks for your focus on our business , as I hope you can take away from this call .
Speaker #4: We're super pleased with the transformation efforts that we've undertaken . The business is performing well . Our teams are engaged and the strategic initiatives that we've put in place are playing out exactly as we'd hoped .
Speaker #4: So, more to come here from the National Vision guys, and we hope to see you all on November 17th at our Investor Day.
Speaker #4: Thanks so much .