National Vision Holdings (NASDAQ:EYE) reported third-quarter results on Thursday that beat earnings expectations but missed on revenue, and the optical retailer's updated full-year outlook came in below analyst estimates, sending shares slightly lower in premarket trading.
Adjusted earnings per share more than doubled to $0.30 from $0.13 a year earlier, topping the analyst consensus of $0.17 by $0.13. Net revenue rose 4.8% to $510.5 million from $487.3 million, but fell just short of the $512.65 million estimate. Adjusted comparable store sales grew 2.8%, while reported comparable store sales rose 3.6%.
The company now expects fiscal 2026 adjusted EPS of $0.95 to $1.03, with a midpoint of $0.99 below the $1.01 consensus. Revenue guidance of $2.02 billion to $2.04 billion also trails the $2.06 billion analyst estimate, with the $2.03 billion midpoint representing a miss. National Vision narrowed its adjusted comparable store sales growth outlook to 2.0% to 3.0% from a prior range of 3.0% to 5.0%.
Adjusted operating margin expanded 320 basis points to 7.3% from 4.1%, including a one-time benefit of $4.7 million from IEEPA tariff refunds. Excluding that benefit, adjusted operating margin expanded 230 basis points. Adjusted operating income rose to $37.1 million from $19.8 million.
"Our strategy continues to deliver profitable growth as we execute the commercial transformation of the business," CEO Alex Wilkes said. "Third quarter adjusted operating margin expanded 320 basis points and adjusted diluted earnings per share more than doubled year over year."
The margin gains came despite a 5.6% decline in customer traffic, which was offset by an 8.9% increase in average ticket. Management attributed the traffic pressure to an extension of the purchase cycle among lower-value, cash-pay customers, while higher-value transactions and managed care customers grew.
"The majority of our Q3 ticket growth came from mix rather than like-for-like pricing, reflecting improvements in customer mix and product attachment," Wilkes said on the earnings call. He noted that the top 25% of transactions drove positive ticket and traffic growth, while the bottom 25% by ticket value, which includes the entry-level bundle offer, represents only a high single-digit percentage of total sales and an even lower percentage of gross profit.
America's Best delivered adjusted comparable store sales growth of 3.4%, while Eyeglass World declined 2.5%. The company ended the quarter with 1,285 stores, reflecting eight America's Best openings, three America's Best closures and one Eyeglass World closure.
CFO Christopher Laden said gross profit increased 5.8%, or $16.3 million, driven by the higher average ticket and the tariff refunds. Excluding the one-time benefit, gross profit rose about 4% and gross margin rate declined approximately 40 basis points, reflecting the mix shift toward higher-value products. Adjusted SG&A was $241.2 million and leveraged 250 basis points as a percentage of revenue.
Looking ahead, National Vision plans to accelerate new store openings to approximately 50 to 55 in 2027, about a year ahead of its original timeline. The company also announced a new $100 million share repurchase program through December 2030, replacing its previous authorization. During the third quarter, it repurchased about 1.1 million shares for $20 million.
National Vision also outlined a merchandising partnership with Meta beginning in the fourth quarter, bringing co-branded advertising to Meta apps along with in-store signage and product education. All stores carrying Meta eyewear will appear in the prescription locator on meta.com with direct links to store pages.
On the call, Wilkes said the company is deploying iPads and iPhones to stores to demonstrate Meta eyewear capabilities face to face with customers. "We're really excited about that — the ability to bring it to life in a way that, frankly, we haven't done yet," he said.
Analysts pressed management on the traffic decline and the decision to accelerate store growth despite softer comps. Wilkes said the traffic loss is concentrated in lower-value transactions and that the company's higher-value customer cohorts are growing. "We're leaning into the customers and patients that are showing the highest degree of activity in the category and we certainly won with them in Q3," he said.
Laden said the company remains committed to its long-term profitability algorithm of 50 to 150 basis points of annual operating margin expansion. "We've bent the cost curve successfully to drive 230 basis points of operating margin expansion year to date and guiding for around 110 basis points at the midpoint of operating margin expansion for the year," he said.
For the fourth quarter, National Vision expects a deceleration in adjusted operating margin rate as it enters a lower seasonal sales period and continues to invest in the business, including reinvesting about half of the tariff refund benefit into incremental marketing. Laden said the company will invest approximately $2.5 million to $3 million more in the fourth quarter than its original guidance.
The company ended the quarter with $60 million in cash and total liquidity of $353.3 million. Total debt outstanding, net of unamortized discounts, was $233.6 million, and net debt to adjusted EBITDA was approximately 0.7 times on a trailing 12-month basis. Year to date, operating cash flows were $134.9 million and capital expenditures were $55.5 million.
National Vision expects fiscal 2026 capital expenditures of $72 million to $74 million, including investments to open approximately 30 new America's Best and Eyeglass World stores this year. After closures, it expects net growth of 17 stores, excluding the 20 military locations added in the first quarter.