National Vision Holdings, Inc. (EYE, $38.97)
By:
Grace McCrea, AIM Student at Marquette University
Disclosure: The AIM
Small-Cap Equity Fund currently holds this position. This
article was written by myself, and it expresses my own opinions. I am not
receiving compensation for it, and I have no business relationship with any
company whose stock is mentioned in this article.
Summary
● National
Vision Holdings, Inc. (NYSE: EYE) specializes in the
sale of optical products, specifically eye care and eyewear. The majority (91%)
of revenue is generated from the Owned & Host segment, which contains sales
from the eyeglass companies that EYE works with. The remaining revenue comes
from the Legacy segment, which processes
inventory and lab services.
● Just a few weeks ago, on April 11,
2022, EYE added Joe VanDette to their company as Chief Marketing Officer. He
has previous experience at Smart & Final (grocery), as well as at Toys ‘R
Us (clothing and toy retailer) in positions involving marketing, analytics, and
strategy.
● In an investor presentation released in
March 2022, EYE emphasized that their store count has been increasing at a CAGR
of 7% for 16 years. Although their new store success rate is a very impressive
97%, a comment about their commitment to e-commerce would have been beneficial.
In order to accommodate younger generations who prefer online shopping, it will
be necessary for EYE to focus on improving their experiential platform in the
digital space.
Key Points: Although
EYE has been committed to Corporate Social Responsibility (CSR) for over 30
years, they began a special dedication to CSR in 2021, which started with an
Impact Report. In order to evaluate their historical commitment to CSR, EYE
organized a strategic assessment and a sustainability assessment.
To
begin these assessments, EYE identified their most prevalent environmental
impact locations throughout the business. This helped clarify focus areas of
CSR that need improvement at National Vision Holdings. Finally, management
created a governance structure, lived out in the Board of Directors, to
prioritize CSR initiatives.
In
addition to this commitment towards CSR, EYE has an advantage in the market as
a whole, which is important for their future success. According to management,
EYE currently has 965 locations throughout the country, which only represents
about 31% of the total available market. The other 69% of the market represents
extreme growth potential for National Vision Holdings, Inc.
What has the stock
done lately?
The
overall markets saw a rough start to 2022, and recent macroeconomic issues like
the conflict between Russia and Ukraine have not helped. However, in their
Q4FY21 earnings call on Feb 28, 2022, EYE reported a 4.46% increase in revenue,
signifying that they beat earnings. This is significant for many reasons, but
primarily because it marks the first year that EYE brought in net revenues
greater than $2 billion. Even with this positive news, EYE has reported a YTD
return of -21.57%. This is likely due the company’s struggle to report
pre-pandemic same store sales growth.
Past Year Performance: EYE’s
performance over the past year has been quite volatile, resulting in a 52-week
return of -26.47%. As shown below, as of April 28, 2022, the stock is rather
cheap and trading near its 52-week low of $34.70.
My Takeaway
EYE’s
dedication to CSR is impressive. Commitment to corporate social responsibility
and/or environmental social governance is currently a majority of investor's
priority and preference. It’s really important to know what investors, as well
as customers, want. With this in mind, I would like to see a stronger
commitment to their customers through e-commerce. With one of their closest
competitors being Warby Parker, who is known for offering an exceptional online
experience for “trying on” glasses, EYE must commit to the younger generations
who prefer to shop this way.
