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National Vision (EYE) Rides on Comps Growth Amid COVID-19 Woes

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On Jan 8, 2021, we issued an updated research report on National Vision Holdings, Inc. (EYE - Free Report) . The company has been continuously witnessing positive comparable store sales (comps) growth. However, rising costs can exert pressure on the bottom line of this Zacks Rank #3 (Hold) company.

Over the past six months, National Vision’s shares have outperformed the industry it belongs to. The stock has gained 74.3% compared with the industry’s 17.9% rise.

National Vision exited the third quarter of 2020 with better-than-expected results despite coronavirus-led economic qualms. The company witnessed comparable growth on increased customer transaction in the quarter.

The company experienced positive comps in the eyeglasses and contact lens, with especially strong performance in eyeglasses. Eyeglass pumps sales were robust driven by increases in both customer transactions and average ticket, resulting from increasing adoption of newer technology lenses at higher prices. The contact lens category continued to see growth in average ticket as contact lens customers are increasingly adopting newer technology lenses that have higher prices, a trend we expect will continue.

 

The extension of the partnership with Walmart looks encouraging. Currently National Vision is confident about its financial flexibility and liquidity to navigate this pandemic. Third-quarter 2020 comp growth was 12.4%, the best reported comp growth over the past 18 years.

On the flip side, the pandemic has been wreaking havoc on the economy and the impact on National Vision has been damaging as well. In the third quarter, although, the impact to net revenue and profitability was not material due to uncertainties arising from the pandemic and its duration and impact on the United States, the company once again could not provide its 2020 financial outlook.

The company anticipates incurring incremental COVID-19 expenses of approximately $9 million during the year.

National Vision plans to continuously spend on television advertising and digital marketing in order to maintain the comps growth trend. Rising costs have been putting pressure on its bottom line.

Moreover, the company’s high dependence on a limited number of suppliers exposes it to concentration risk.

Key Picks

Some better-ranked stocks from the broader medical space are Hologic, Inc. (HOLX - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .

Hologic’s long-term earnings growth rate is estimated at 17.4%. The company presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2 (Buy).

Patterson’s long-term earnings growth rate is estimated at 11.1%. The company presently carries a Zacks Rank #2.

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