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National Vision (EYE) Banks on Partnerships Amid COVID-19 Woes

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National Vision Holdings, Inc. (EYE - Free Report) 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 year, National Vision’s shares have outperformed the industry it belongs to. The stock has gained 67% compared with the industry’s 11.7% growth.

National Vision exited the first quarter of 2021 with better-than-expected results. The company recorded positive comparable store sales (comps) in eyeglasses.

First-quarter 2021 comps growth was 18.2%. 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 expected to continue.

The extension of the partnership with Walmart through 2024 looks encouraging. National Vision continues to generate positive results at the five additional Walmart Vision Centers added in 2020. The company opened 25 new stores during the first quarter and ended with 1,230 locations, a 4.9% increase in store count compared to the previous year.

Currently, National Vision is confident about its financial flexibility and liquidity to navigate this pandemic. Based on the solid year-to-date momentum even amid the pandemic, the company has raised its full-year guidance, which is indicative of the bullish trend.

In the first quarter of 2021, adjustable comparable store sales growth increased 35.8%. Eyeglass World delivered a 48.3% increase and America's Best delivered a 35.3% increase. The Legacy segment saw nearly 30% comp increase.

National Vision plans to continue executing on core growth initiatives and investing to strengthen competitive advantages. The company had a strong start to the year with 25 openings in the first quarter and continues to plan to open about 75 stores in 2021. The company has a solid pipeline of specific locations to open new stores for 2021 and 2022.

Moreover, the company will stay focused on investing in television advertising and digital marketing. National Vision’s lab network is well-positioned with the capacity in place to handle the projected 2021 requirement. The company also remains focused to be a key low-cost provider.

On the flip side, according to National Vision, the ultimate impact of COVID-19 on the company’s financial outlook still remains uncertain. 

Further, 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. The company’s operation in a tough competitive space along with its high dependence on vendors is worrying.

Key Picks

Some better-ranked stocks from the broader medical space includecApollo Medical Holdings, Inc. (AMEH - Free Report) , Envista Holdings Corporation (NVST - Free Report) and Teleflex Incorporated (TFX - Free Report) .

Apollo Medical, which carries a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Envista Holdings, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 26.4%.

Teleflex, carrying a Zacks Rank #2, has a long-term earnings growth rate of 11%.