National Vision Holdings, Inc. (EYE) Earnings Call Transcript & Summary

Good day, everybody. This is Simeon Gutman from Morgan Stanley. I am the Hardline, Broadline and Food Retail Analyst. Thank you very much for joining us. This is an audio webcast of a virtual fireside chat with National Vision management, represented by Reade Fahs, CEO; David Mann, VP of Investor Relations; and Patrick Moore, CFO. I'm going to read a quick disclaimer before we get underway, and then we'll open it up into the fireside chat. Also remind everyone who is joining us via the audio, you probably are also -- could join us through the webcast, and you could submit questions that I could then bring into our discussion. The disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, again, thanks, everyone, team from National Vision for being here.

I'm going to start off by asking Reade, if you can provide a 2020/COVID overview to start?

Sure. Sure. Thank you, Simeon. And thanks for having us. So let's just go back a little bit. We ended last year strong. We started this year strong. We are very optimistic about what this year was going to be for us and mean for us. And then, of course, sort of the COVID came on the dark horizon there. In mid-March, we were probably the first large chain to take the decision to close down. And from the time we shut down, we were preparing mentally to reopen, and we sort of manage that entire period with a very long-term orientation. We worked closely with our doctor network, our network of optometrists. We have about 85 lead optometrists with whom we planned our protocols. And of course, during this time because optometrists are so important to us. We continued to pay our optometrist, which won them -- won us great loyalty and appreciation. And with them, we formed protocols that allowed us to gradually reopen through the month of May, ending May with all of our stores open. There was tremendous pent-up demand because, of course, what we sell is a necessity, and it was harder during the time of closure to buy this product. I say harder -- unlike many retailers who were close to the public, we actually continue to staff our stores because there were so many people who needed us that our phones were actually ringing off the hook. We also have online offerings and all, but our customer is very geared towards calling stores and interacting with stores, so they were calling and asking if we could ship them contact lenses. They were calling about eyeglass-related pieces and eye exam and eye health-related pieces, and they were calling, mostly saying, when are you opening again? I want to come back. We were fully open at the end of May and June was among the -- I think it's the best month of my career with a 19% comp and it just continued well into Q3, where we had the best quarter of my career with a 12.4% comp. And what's interesting to note about that comp was, our marketing was dramatically reduced versus prior year with us sort of -- we had such healthy demand that we didn't need to market that was appeared. The government stimulus by then had all been sort of put through the system. So wasn't driven by that. And we usually, during that period, have a very strong back-to-school season that's driving our business. But our back-to-school season was not -- for the whole industry was quite muted. And despite all of those things, we still had a stunning quarter. And as we announced that those trends continued through October. That's what we announced in our last earnings call, which is at the end of October there. So it continued forward. And overall, what we think is that the strong trends that we had been benefiting from for the past several years that gave us such healthy comp performance for the last several years have been amplified by COVID and those trends are such things as sort of the loss of market share by the independent sector and the traditional chains and the mall chains, coming to the value chains with us benefiting especially from this. And we think those trends have been amplified post-COVID in a way that, that will make us stronger over the long term. We think that COVID sort of make strong companies stronger and weaker companies weaker, and we're seeing that in our industry that, that is occurring. So if you could have told us, certainly, when I think back to those first 2 weeks of late March, which were -- so what is happening to the world and think of where we are now. We are feeling just quite optimistic in terms of the long-term trends we're benefiting from. Combined with, I think, the strong execution we've had in terms of making our associates, our doctors and our patients and customers feel that they are getting a very safe experience when they interact with our stores.

I appreciate the color. May I ask you maybe just as a follow-up to that, is there anything that you wish you had in place? Obviously, if you knew that we were going to go through a pandemic, there's a lot of things you could plan for. But are there -- were there certain capabilities that, "Hey, if we had this in place, then maybe we would have had a smoother sort of transition." I don't know if there's any of those type of thoughts that come to mind?

Nothing showed how that be on that front. I mean, it is our first pandemic. So it's quite a learning experience. What I'm really appreciative of is that we're a group of folks who have -- what I think of, say, the 85 doctors that are our area doctors, our lead doctors. Do we all know each other quite well because we've sort of been with each other for a long period of time and it allowed for sort of nice honest clear conversations of the type that helped us make a lot better decisions during that time. But nothing stands out in terms of that.

So can you talk about your top and your bottom line growth algorithm. I don't know, it wasn't perfectly prescriptive before the pandemic. But I'm curious if there's anything that you could think through that -- how it could change going forward?

Patrick, I think you're talking, but...

Yes, yes, yes. Simeon, it's Patrick. I'll take that one. As you think about National Vision, prepandemic year, our growth algorithm was beautifully simple. We opened 75 or so new stores a year. We drove comps in a nice range. Our typical guidance range has been 3% to 5%. And frequently, we've exceeded that or met that. And inside those comps, Simeon, about half of that comp growth has come from those ramping stores beyond year 1 but before year 5, and then the balance of that comp growth comes from mature stores, where we've seen nice comp growth as well. A good deal of that has flown through at the EBITDA and EBIT line on a very predictable and frankly, ubiquitous in simple business model. I'm sure we'll end up going a little deeper on margins. But as I think about kind of margins broadly, we certainly had some margin headwinds as we added public company costs and did more things around cyber. And we took on some more distribution business for Walmart. And we kind of cleared all of those grow over challenges midyear in '19. And as you recall, had 2 really nice quarters in a row, third and fourth, where we were delivering pretty substantial margin improvement. Gosh, we were doing the same thing really through the day that we shut our stores back in March. So Q1 would have been a continuation. As I think about the future, I think we get right back on that same track, Simeon. And there will always be kind of puts and takes, headwinds and tailwinds for margins. But I think we're going to be right back on that -- on the track that we were on in the second half of 2019 and early this year. So I'm optimistic as I think about kind of the growth algorithm continuing. Only -- there's only one asterisk that I would put on that, and that is that we are spending a little more in our stores on PPE during COVID phase. I think we've guided at about $1 million a quarter that works out. You do the math, it's a couple of hundred bucks per store per period or month. And that's really just cleaning and PPE that we need to be safe for our associates, doctors and patients and customers. So a lot of the growth algorithm, really, all of it is still intact with that one asterisk. We've not provided guidance for next year, but we -- we'll continue to be that same grower that you've accustomed to see us be.

I'm going to -- I do want to focus on margins. I'm going to come back to margins, Patrick, in a second. I want to jump back to Reade for a minute. He made a point in, I think, the first response around the big get bigger, the strong get stronger, I think, was the way you phrased it. Do you have a sense of how that played out in, call it, the last couple of quarters? And I'm trying to think about the competitive landscape. We cover other sectors in which you had independent businesses or competitors that weren't able to be open because of scale or labor or employee issues. And therefore, there was some share gain, some of which should be permanent. How do you sense that? Like how do you get a gauge of that for the optical retail industry and how pervasive were these issues and share gain? And then how do you think about that because these businesses, in theory, will be -- if they're still existing, will be open next year as far as share recapture?

Yes. Well, so let's pick some of the trends that were sort of happening preCOVID. Like in February of this year, the Sears Optical business, which had been a huge part of the category years ago, announced that they were shutting down. So they eliminated themselves from the playing field in February. And in a similar way, there's a large group that does a variety of hosts, including JCPenney, and there have been some press announcements about them filing those sorts of papers you file when there's a chance you're going to sort of liquidate or layoff a lot of people. And so that sort of some big structure pieces, but then there are a lot of independents who saw -- who were thinking of retiring in a few years and now with COVID and health concerns, people at an age where they are -- where they are especially at risk, are saying, you know what, I don't think I'm going to open my door again. And I also think -- it's clear that some are limiting their openings and hours and all. And it generally believe that this is going to -- that there are just going to be less doors next January than there were last January. And when I talk to the sorts of people who are able to comment on this because they see more than we do. And that's, say, the insurance companies that tend to deal with most, all of the doors in the country or the, say, contact lens manufacturers who are dealing with most all of the doors in the country. I hear numbers between 5% and 10% in terms of just less doors out there that they're anticipating or anticipating reduced doors. A lot of these one-person shops, when -- they don't have a lot of financial resilience. They often don't really understand cash flow in the same way that a larger more prepared group does. So I do think that, that's -- that there are some structural pieces that are making it different. And I think that's part of the favorability we're seeing right now.

Great. And I think you've been asked this on the earnings calls. Do you have a sense for market share gains thus far year-to-date?

Not really. That's hard to have at this point in time. We generally -- there's a lot of data that tends to come out toward -- that is for the full year that then sort of comes out in the spring that is the best source for that sort of information.

Got it. Okay. That's helpful. Okay. So that was good. I'm going to flip back to maybe the margin question. And so I think, Patrick, you mentioned the margins were starting to -- I don't know if you used the word inflect, but we use that word a lot with National Vision. And very much looking forward to this inflection lapping some of these costs. I want to ask you this. I think it's been teed up that we should be on this cusp of inflection. And I wanted to ask you almost how do you feel about that now looking into 2021 without being specific on guidance? The ability for margins to inflect it seems like it's been better than it's been in quite some time. I guess, do you agree? I know you put out the asterisk, which I'm going to probe a little bit, but for now just broad-based about this inflection continuing and ability to flow more dollars to the operating income and then the bottom line?

Yes. I would say, Simeon, I'm good with the word inflection as we think about the transition between first half last year and second half of last year, I think that's an appropriate word. We did inflect. We -- again, we had -- we kind of cleared some of the grow over challenges. We cleared the 1-year period where we had taken on incremental contact lens distribution margin for our key partner, Walmart. And so margins did begin to inflect at that point. What I think we have an opportunity to do now is to execute and deliver some incremental margin gains. I don't really see a major inflection on the near-term horizon. But I feel pretty good about our opportunity to continue to gradually see some margin benefit. If you don't mind, I'll go through some of the major puts and takes that we think about internally that I think makes sense for you and investors to think about as well. When we think about the gross margins we've seen a few years of fairly consistent wage inflation pressure on the optometry side. There's some hope, I'll call it, or at least some maybe early sense of supply and demand improving there, which would naturally relate or precipitate less of that wage inflation. That would obviously be very helpful. We also tend to get lab productivity lifts each year, recall Simeon, we built our fourth domestic lab and opened it in early '19. And so we're continuing to leverage those fixed costs. So that's kind of how -- those are some of the major factors in gross margin. At the SG&A line, we have an opportunity to leverage advertising, and we have an opportunity to leverage corporate overhead. We do have some degree of associate wage inflation, but I kind of tell you, I really think our operations team has managed that very effectively to date, in how they manage the labor in the stores. And just like our labs, we look for ways to pick up productivity gains in those 1,200-plus stores as well. So there were times when I felt like the headwinds outweighed the tailwinds, and I think we're in more of a period now where management has an opportunity to eke out some gradual margin changes, coming off the inflection that occurred between second and third quarter of last year. So I'm -- I guess cautiously optimistic is the way to say it. We're not providing guidance today, and there's a lot of factors still at play. We've got to overcome a little bit of tariff pressure next year that we're aware of. And we feel pretty decent about doing that, but we'll certainly lay a more articulate picture out in February as we cover our end of the year results. But I, at least, feel that we have a good chance to deliver some gradual margin improvement over time.

And you mentioned the asterisk PP&E. And one of the questions I'm just planning to ask is, if operating costs are rising, how can you maintain margins? How can we still get to that inflection, even with some of these higher costs?

Yes. I just -- I go back to the -- maybe we'll see a little better supply-demand balance for ODs that could -- that's a large part of our cost structure. Any benefits there and decreasing wage inflation could help offset -- offset that. I think we're going to see a -- already seeing a friendlier environment for rent in some of the leases that we're signing and extending maybe a friendlier environment for advertising as well. And then again, as I mentioned, every year, our lab teams deliver a couple of points of productivity lifts on those labs as we continue to build out existing square footage and put more equipment in them. And last but not least, we intend to do a good job of leveraging our back office and corporate overheads. So all of those things to me add up such that -- yes, yes, PPE is a factor. I mean, you can take what I've given you those for, and we know it's about $1 million a quarter until we revert. But I can't give you the quarter to plan to revert. But yes, it is a factor, but there are so many more things at play.

Got it. Maybe shifting back to Reade. I wanted to talk about some of the comp strengths and the comp trends. I don't know, feel fascinating at this moment because I'm sure you're getting new customers. And so I'm curious what you could share with us around the customer file, the book, what percentage or what portion of your growth is coming from new. How do you really assess pent-up demand? Is that -- can you discern that? And then what are you doing as far as retention, so anything different than you've done in the past? Because I know a lot of executives we're speaking to in the retail world, everyone is trying to go out and retain. You actually have a file, you have very good information, and you have a personal connection. So anyway, I'll leave it broad-based on sort of the acquisition and retention of new customers.

Great. Well, let me start with your question about gaining new customers. So in our record Q3, we saw gains in both existing and new customers. We're getting a higher mix of new customers, especially at Eyeglass World. America's Best was more consistent with historical trends. Eyeglass World saw higher new customers. It really feels like the Eyeglass World brand has really found its moment in the post-COVID period on the specific comps. Eyeglass World had an 18.4% comp in Q3 and America's Best had plus 13.6% comp. So again, those are great numbers, but generally, Eyeglass World has been sort of America's Best little brother, but now it seems to be -- the consumers are flocking to it in all new ways because the speed of service, same-day service, that sort of things. And again, important to note that this is all happening with significantly lower levels of marketing and against the backdrop of a muted back-to-school season. In terms of pent-up demand, it is hard to quite quantify the extent of pent-up demand. But we do know through research and data that a significant percentage of our customers are sort of staying out of the market. I bet many of you on this call, probably after your -- after COVID sort of -- after the lockdown period, I bet you didn't run to the dentist. People sort of waited and that sort of thing. And we know that there's a percentage of our customers who are waiting this out. The nice thing about our category is, it's not like being in the restaurant business and having people miss a meal due to a snowstorm. Your -- that's -- you're never going to eat last night's dinner again. Our customers, when they are waiting their eyes, just get worse, they seem to meet us more and more in that way. So -- but I think we're sort of -- we're a bit beyond just pent-up demand here. And I think it's clear we're making market share gains. And in terms of retaining customers, I'll tell you it's going to seem so simple, but the best way for us to retain customers is to make sure they feel like they got fantastic value and a great interpersonal experience. We'd like to say that this is a word-of-mouth category. When you have wore a new pair of glasses people notice that instantly, they often comment. It often leads to a conversation. So we feel that optics is a fair game that those who take the best care of the patients and customers tend to win and build share and those that don't tend to lose. We do have a number of sort of digital marketing means of retaining customer loyalty that we're -- that we get ever more sophisticated at and smarter at. But when it comes right down to it, if they're smiling and happy when they leave the door, knowing that they saved a lot of money and feeling -- and frankly, what we love is when they're knowing they saved a lot of money, and they don't think they trade-off anything to do that. That is the customer that is always ours and is out there being our ambassador, and our best and most cost-effective marketing.

Do you think pent-up demand from the depth of the pandemic and maybe we're in the depth again has been released, has been realized?

It's hard to quantify that. I -- we do believe there's a significant percentage of customers who are still waiting due to safety, primarily safety related, maybe a little bit economic related, but mostly safety related.

Got it. And then online penetration or online, I guess, digital as being part of your business in optical retail. And I don't know if the question needs to include Telemedicine, Reade. But I wanted to ask about how you think about online and the role of digital in your business? And then does it change? Or no, we're just going to be on the same path as we were before?

We -- so for people new to us, online at the end of last year, e-commerce contacts was 20% of the category and for eyeglasses, it's about 5% of the dollars in the category and sort of for contact lenses, contact lens have been sold online for 20 years. And the rule of thumb historically have been, they gain one share point per year. We are a player in this, 4% of our sales overall are our online sales with the great majority of that being contact lenses. Contact lenses is a dead-simple online purchase, and we always offer that to customers as an option. I'll say, as I said, when the doors were locked to the public, our phones were ringing off the hook. Again, we were staffing our stores because of people calling up, and that was a lot about that. And again, they could have done this online, but there's a default mode of calling our stores. We have plans to ever more enhance our online offerings for our customers. And we think that is going to be an ever-growing part of things. But if you look at our comp store trends of the past 18 years, the past 5 years or even the past 3 or 4 months, you sit there and say, all of that is being achieved against the world where online contacts and eyeglasses are being offered. I will say that eyeglass category is one of the toughest categories for online purchases. People just like to try on this product and the purchase always starts with an eye exam and when you get an eye exam from us, you walk out of the eye exam room and you're standing in a store full of frames that are very low priced. So it's almost -- it's easier, more convenient to do it, to get the job done right there. We believe online will continue to grow for the category and for us, and we believe that there are things we can do to ever enhance our offerings. But certainly, we are able to grow nicely even amidst a world where some customers want to buy online.

Right. I guess, Reade, do you view e-commerce as a threat to your business? I know strategically, I'm curious how you think about it. And I very much trust your judgment on how you think around this and how e-commerce evolves and realizing your primary customer may not be the same one that is using this e-commerce today to buy their eyeglasses.

Right. So our mental view of the category is that the independent sector, the traditional sector of the category, which tends to be more expensive and the mall-based sector are all losing market share to the value segment. The value segment includes us and some online, but we are a big beneficiary of that. And that is a large part of market share eroding into the -- into our part of the market. We probably do lose a little bit to some of the pure-play players, but what is coming to us from the traditional parts of the category is dramatically larger than anything we are losing to the pure online part of the category, and that's been the case again for 4, 5 years. We regard e-commerce as an opportunity. In the omni-channel genre, we think that our -- the more we are able to allow our customers different ways of interacting with us that provide added convenience for them that, that's just what being consumer sensitive is all about. So again, giving -- and again, this isn't e-commerce necessary, but it's omni-channel. Allowing people to say, "Yes, we're just going to ship it to your house." You don't have to come back in for contacts or for glasses as an offering and -- but making ever more offerings available both -- primarily actually to our past customers saying as other means of retention. There were lots of different ways to interact with us, especially now that we have all your information in great detail, in our computer banks. So we see these different digital options as ever more opportunity for us to retain and delight our customers.

Great. Going back to, I guess, market share, I thought of it because I was thinking of e-commerce, but I was thinking more about market share and optometrists or doctors of optometry, as one sign Reade that some of your, let's say, weaker or independent competitors or. Could you gauge like either the level of new interest of optometrists coming to your business. Is that a fair way to look at it? And can you talk about if there is -- has been like a consistent pickup in that? Or do you expect something like that to increase going forward?

I would say that the increase has not been as dramatic as I might have expected at the depths of our -- of the lockdown period. I was expecting it to be a lot more. We've had strong retention of our doctors, and we consistently are recruiting more doctors to us. I always hope from the day when there's a tsunami of doctors knocking on our door, that has not been achieved yet, but I do believe that these trends over the long haul should be helpful to our ability to recruit more doctors. And we generally are always out there looking for more doctors, especially those open to the geographies that we need them in. And there was a part of a question earlier, I didn't answer that relates to this, and that was sort of in the area of what we call remote medicine and remote medicine is where the patient is in an exam room surrounded by the expense of equipment, we put into an exam room, and the doctor is remote and doing the exam from a different place. Let's just call it from their den. And that is something that we think could play an ever nicer role for us, especially in hard to recruit to areas, and we have been piloting that for a while. We've been a little bit more aggressive in that of late, and we continue to believe that could be an ongoing strong opportunity that could allow us to either add a second doctor to a store that has one or perhaps even -- they have stores that are primarily remote medicine-oriented.

Got it. What's unique in retail right now, and I'm curious how this -- you think it could apply is that you've had retailers that have done really well during the pandemic. They've reinvested back into wages, made some of their hazard pay more permanent. And granted, they pay at very different scales, right? You have extremely skilled labor on one end and some, I think, some additional labor on the other end. And yet, unemployment is still high, and we're just talking about evolution of wages, and this is my long-winded question of talking about optometrist wages. In the availability or the pool in theory should get higher. You just mentioned it wasn't -- it didn't go up as much as you thought, but you also have a very skilled person in your stores. So sort of how do you -- I know the level of inflation should moderate or taper. But how do you think -- how should we think about the wage around optometrist going forward?

Yes. I'll link that back to the margin discussion we were having. I mean, as you're aware, it's the fulcrum that the optometrist is the fulcrum point of the model. And that's true across all brands and especially true in our top growth brand, America's Best. And so paying those folks competitive, fair wages is important. Our optometrist work a lot for us. We pay them well, and it's -- again, it's a fulcrum point of the business model. We saw some lessening of that degree of wage inflation as we saw the back end of Q2, and we reported that in Q3. Not ready to call that a trend yet because it's just tough times right now to plan and project. But there is opportunity that some improvement in supply demand could lead to some improved wage inflation. We internally -- again, it's a very valuable resource. We certainly want to optimize that resource. And so we think as much about how do we appropriately manage the book so that those folks have the right amount of patient volume. And we probably think a lot more about that than how much do they cost us, not to say we don't think that. But we look at optimizing the whole resource both in terms of volumes as well as kind of the cost of the resource.

Great. Maybe timing then of optometrists is something, Reade, you just mentioned of -- I think you said having like a second optometrist and then do more appointments from that location. And I want to also tie in to Telemedicine, and I'm not sure if these points were connected or not. But the idea Reade of this market is very big. You're attacking it vis-à-vis 2 formats at this point, plus an online business. In terms of sweating the assets and leveraging the most out of your -- both your labor and your capabilities, can sort of Telemedicine or Summit Technologies be leveraged by you. In a way that the productivity and the share gain can significantly increase without having like a material or a commensurate increase in asset base?

Yes. So the way we sort of launch our stores is we have a -- we set up one exam room. We hire a doctor, and then we sort of open the store and see how well that store does. As it gets to a certain volume, we then sort of build out the equipment in a second exam room that had been empty up till then. And then the doctor jumps from one room to the other, and there's always a patient sitting in the chair, so the doctor becomes much more productive by being able to jump from one room to the other. And then as things grow, we may bring in a second doctor. Many of our stores have 2 doctors. Some have 3. And again, that makes the store more productive use of those assets. And what we're experimenting with now in the remote medicine is can we -- what happens if instead of a second doctor or in places where we'd like to have a second doctor and can't find it, that we put in the remote medicine option at that point in time. And what sort of productivity gains do we get from that? And thus far early pilots are encouraging, and we are continuing to learn more in that way. But that fulcrum point is the key way to leverage our assets further. I'll also say some of the more say patients we sign up for subscription or at-home delivery of their contact lenses. That's another way of allowing our store to be productive because the customer isn't coming into the store. They're doing their sale online and that helps us to make our stores more productive as well.

Speaking of stores, can we talk about America's Best and Eyeglass World briefly. When we learned about these businesses several years ago when National Vision was coming public, Eyeglass World was -- and I guess, still is the sort of the up and comer. And I think it's doing a lot better than, I guess, even you had thought. Can you -- I know you don't have a favorite child. I don't think anyone does, right? But can you talk about -- just what's been different than expected with either of the businesses, whether it's the resilience of America's Best or some of the breakout of Eyeglass World?

Yes. I think it's actually been the breakout of Eyeglass World. I would have not anticipated how strong it emerged and how consistently strong week in and week out, it emerged. And I think it just started competing on a different plane post-COVID. So that would be a big piece. And I guess, frankly, America's Best. I mean, if you'd been talking to me in April or May, I wouldn't have predicted a 13.5% comp for America's Best in Q3. I -- it's just a very strong number. And again, as I said, that -- all those trends are consistent through October. That was the last thing we've said about that publicly. But I just -- it goes back to that thing. We were executing well against very favorable market trends prior to COVID, and then post-COVID, those trends got better, and we continue to navigate well. And I got to say, navigate is really the term. We are -- our fingers on the levers of this business. We're just very -- we are navigating carefully through the complexities of what we have here. I'm pleased with how it's working. I'm just so pleased that there's so much internal communication and trust back and forth to help us keep in touch with what is what is being experienced very differently across the country. Your experience of COVID at any given moment is a very geographic thing. We are having consistent trends across geography, even in hotspots, consistent trend, but I think it's very much just how closely in touch with and the uses of sort of toolkits to just refine things at a very local way. So I guess I just really couldn't be prouder of how the team is interacting and performing and rising to this adversity.

And Reade, your formats cover what would be, call it, the lower end of the market, the value end and probably the mid-tier end of the market or value to mid-tier. Have you ever given thought to covering the upper tier? And what would be -- is the restriction getting access to some of these brands, but why couldn't your business model succeed in an upper tier price points of the market or product?

There is no access problem, we could open a high-end store tomorrow with the flick of a switch and everyone would be happy as can be. These products have historically been too expensive. And why are we benefiting because we're saying they don't have to be this expensive. Why did the marketing campaign we started in 2015 do so well because it began with you paid too much for your glasses, with the thought being unless you came to us, you are paying too much, I think, the future of the high end of the category. And forget, I'm not talking about like the crazy high-end luxury Prada, Fifth Avenue stuff. I mean, rich people are always going to buy rich things. I'm talking about more expensive than main street could ever contemplate affording. This category has been too expensive, and it doesn't need to be so, and it's been because so much of it's still controlled by the independent sector and the independent sector is no economies of scale whatsoever and no leverage and is being sort of squeezed by the insurance companies and squeezed all over the place. And luckily, we have large economies of scale. So -- and great efficiency in our labor network and just a structure around low price. But I don't -- why compete in the part of the category that's deteriorating when there's so much opportunity in the part of the category that's exploding. Said another way, I just like -- it's just so much easier to sale when the wins in your sale. Why go do the hard parts? Stick with the easy part.

Yes. In our last minute, maybe in a half, quick hit, Walmart. I always like to hear from you on this, Reade. The way you've approached the partnership it's always refreshing, and I'd love to hear the take. Do you think -- I'll put it this way, in 3 years, will you have a greater relationship with them than you have now same or less?

Great. Well, first of all, tomorrow is the 30th anniversary of the company opening its first store inside Walmart. Of course, the company was founded to do vision centers inside Walmart for 23 years. Our corporate office was inside and abandoned Walmart, which is still, frankly, the site of our largest lab. So -- and if you were to -- if you have Simeon wander around our office, it's sort of a homage to Sam Walton and the Walmart culture that was sort of the birthplace of our company. As I like to say, we have a great relationship with them. And I think they would say a very unique relationship, but I think we sorted out a long time ago how to be a great Walmart partner. And it's been good on both sides for a very long time and remains that way. We did just extend our current relationship on the same financial terms into 2024. And so that's good in last -- a few months ago, for the first time they gave us a handful of new stores that opened, which is the first time that's happened, and that's going well. This is what I say to investors. Invest in a fast-growing America's Best business and a fast-growing Eyeglass World business and a stable Walmart and host relationship and maybe the moon and stars will align, and we'll get to have a broader relationship with Walmart Optical as we are their only partner and they are a great partner. With them on that do not invest saying, "Oh, my gosh, this is a no-brainer that they should allow us to run their 2,800 optical stores that we don't run now. " Do not invest on that. Just know that, hey, it's always nice to invest when there are multiple ways to win. And there's a small chance that expanded relationship could happen, but invest with that as being a possible upside and another possible way that we can win. But know that America's Best and Eyeglass World are clearly the brands that are offering what consumers want in optical now, I'm confident that we will continue to create added value reasons for both those brands to stay, the brands that consumers want to buy from now and into the future. And maybe there will be some fun things coming our way from the Walmart relationship. But otherwise, it's a great, stable, strong, long-term relationship that will remain a stable part of who we are going forward.

On that note, I want to thank Reade, Patrick and David from National Vision for joining us. I thank you again for your participation each year at our conference. Hopefully, you'll continue to be regulars. I appreciate all the insight. We wish you great success through the end of this fiscal year and going forward. Thank you for your time.

Thank you. Great questions, enjoyed it.

Thank you, Simeon.

Thanks.