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

I'm Michael Lasser, the hardline, broadline and food retail analyst from UBS. And we have saved the best for last. Don't tell anybody, but you will be able to see it after we're done with this conversation for sure. You were here when?

Right.

It's right. To my immediate left is Reade Fahs, who has remarkably been the CEO of National Vision for almost 20 years.

April 15 will be my 20th anniversary.

Holy cow! So I got it right. Yes. He became CEO when he was 16 years old. Those frames make him look a lot younger. And Patrick Moore, the company's CFO, who's been in that position since 2014. And we're super thrilled to have David Mann with us, who heads the Investor Relations at National Vision as well. National Vision is a really exciting story. Where I want to start off, Reade, is when we -- just look over the overarching view of the optical retail market. We kind of think about optical retail today where the pharmacy retail business was 20 years ago. Why is that analogy appropriate?

Good. I think that analogy is very appropriate in that sort of the independent sector is so large as it was with pharmacy years ago, and yet the independent sector is consolidating and declining also. And frankly, the independent sector, if you think of an independent optometrist who sells eyeglasses and contact lenses because this category is eye exams, eyeglasses and contact lenses, they have no real economies of scale. They can't get good real estate, they can't get good deals on frames or lenses and they're at the mercy of a lot of managed care reimbursement. And so it's -- their option is to be high priced. And frankly, we have economies of scale all over the place, and that allows us to sell optical goods at a much more favorable price to budget-conscious Americans. And that's been a part of the success of our business for a great many years, and we expect it to be a tailwind for us for years and years to come.

And is there any factor that's present preventing consolidation in the optical retail market much like we saw the pharmacy retail market consolidate over the last 20 years?

Yes. What we see is an ongoing tendency towards -- from independents to the chains, from the chains to the larger chains, from the traditional chains, which, again, have tended to be more expensive to value chains, and we've been the biggest beneficiary of all of that. It's a lot easier when all the category trends are in your favor.

And the last time we spent together was prior to the pandemic remarkably so.

Yes.

A lot's happened since then. How would you describe how your consumer is faring today? Who is the National Vision customer? And how do you think that, that customer is going to behave from here, especially in light of a lot of the economic uncertainty that's unfolding.

Let's start with the National Vision consumer. Our consumers are budget conscious and low income. We sort of see 2 different groups of budget conscious, which you might say is the dollar store customer, who is living on a very tight budget and needs to find value in everything they do, and they find that they can get their optical needs taken care of with us cheaper than they would in other places. Many of them, frankly, can't afford other options than ours. Couple that with value seekers of the Marshalls and T.J. Maxx sort of variety who are saying I can afford other things, but I say that I'm a value hunter. I want to find -- I want to get good value for my money, and they are finding us as well. It's the convergence of those 2. And the key is that we are the low-cost provider of a medical necessity. Your eyes go bad as you age. Glasses and contacts are the way you solve this problem. I see many of you are glasses wearers, and I wouldn't be surprised if some of you are contact lens wearers. I look upon you, I sort of jokingly say that you're an addict to this product. You are addicted to your glasses. You need them to get by in life, you can't do without them. And so it's a necessity to you. And so our customers are frugal people who are looking for great value in a product that is 5 pieces of plastic held together by 2 screws that just shouldn't be as expensive as it usually is in so many different places.

And is very looking as well...

Thank you very much. These are the Jamie Fox line of glasses exclusively at America's Best, and they are good sellers. Very good sellers.

And Reade, as I was complementing you, Patrick threw out his glasses [indiscernible]

Oh gosh, I just took them off.

Those look pretty good, too Patrick.

All right, He's also a great in pink mirrors. Everybody looks good in these in pink mirrors, just saying.

We've talked a lot over the last 2 days with a lot of retail companies, a lot of consumer companies around. Consumer is in a pretty good spot. But there are some well-documented risks on the horizon. You've been doing this for 20 years. You can use some parallels in your experience to compare where we are today, and maybe it's unprecedented, but if you were to draw on your experience, how would you expect the National Vision customer to respond to this well-documented inflationary pressure and this well-documented uncertainty that it's going to experience?

So perhaps the -- as we turn around talking to investors, the one chart we tend to show off the most is the chart that shows that for the 72 quarters prior to the closing for the pandemic, we had -- we never had a negative comp quarter. We averaged 5% comp for that period of time and we were told by people like yourselves that there's no other retailer in that period of time from 2002 to 2020 that had consistent comp quarters. We've never had a negative comp quarter. In fact, because of the 2 COVID quarters, we get to have a negative comp quarter. But it's been very, very consistent, good times and bad, high gas prices, low gas prices, and of course, the recession of '08 and '09. The recession of '08 and '09 was very good to us. Sadly, our lowest income customers sort of just dropped out and hunkered down and just couldn't spend money at that point in time. But we also found there was a trade down effect at that point of wealthier customers who were saying, "Wow, times are tight. I'm now becoming a frugal customer." And so they moved into our category and into the National Vision and America's Best and Eyeglass for Walmart category that we have. And you'd call stores and say, again, 2008, 2009, why are you doing so well? And we would get a lot of different versions of the expression nicer cars in the parking lot, that people are coming. They're seeing these great values. They're buying more and better products. And in inflationary times, we're all going to be paying attention to our money much more carefully, and who knows what's going to come next? But as people become more uncertain in a crazy world, they become more conservative and they hold on to their money as best they can, and we're a medical necessity that you save money on. And so we've -- our big expression in the last recession was make sure to take the smile off your face when you leave the office because the rest of the world is depressed. But again, this is the benefit of dealing in a low-cost medical necessity.

So a few things just to focus in on there. #1 is this trade down. Is that where you would expect to see the impact of the...

In an inflationary or recessionary time.

Yes. Yes.

I will say sort of coming out of the pandemic, we were solid with low-income consumers, too. Solid at National Vision.

And National Vision is bigger today than it's been in the past. What -- does that make it more difficult to generate the same level of growth? Or you're bigger, you have more resources so you can leverage your strengths better today than you might have been able to in the past?

Yes. We've always been sort of very consistent in our approaches. And we like to say we don't have 850 America's Best stores, we have 1 store 850x. And when we build, we're going to build 80 stores this year, we're -- we do new prototypes and the like. But there's a consistency to it that makes it -- it's not a creative game. You're not hoping to catch trends. It's -- that's what makes us consistent and replicatable. So although it is larger, we're able to keep it -- it's still manageable in the same way. And frankly, I think that our approaches have allowed us to continue the small company feel, even as we've gotten larger, and I hope we never lose that. It's -- we've always said, we're a people business. We happen to be selling eyeglasses and we try to keep it very people centered and try to keep its fun in that way and very human even with scale. And there are a lot of ways to do that, and it makes it really nice.

Culture trumps strategy.

And if I can jump in. If you think about managed care has been a tailwind, we remain underpenetrated in customers that have insurance, and we expect that to continue. There was some disruption during COVID phase when a lot of people were laid off and didn't have it temporarily, but that should remain a tailwind. We've bumped up our unit growth this year from 75 to at least 80. So we think that's going to help. And then, frankly, a lot of the trends that have been tailwinds are still there, people staring at screens, aging population. So even though the scale has gotten larger, a lot of those growth vectors are still present.

And Patrick, to dig into that point a little bit, one of the trends that National Vision has seen over the last 18 months is the ticket increase, which historically, the same-store sales increase has been a little bit more traffic focused. Some of that's probably because the consumers had a little bit more money to spend with the stimulus and some of it, to Patrick's point, is Blue Light...

What? [indiscernible] Right.

And you've consistently said, "Look, we're not necessarily trying to push up ticket. We'll sell the consumer whatever they want to buy." But do you see some of the behaviors that have occurred in the last 18 months being more longer lasting in that National Vision's ticket is just going to be structurally higher even as some of the stimulus fades?

I'm going to let you unpack that a little bit. But as you said, our mantra has always been, "Real men and women drive their business by customer count." By making customers happy so they tell their friends, we are so in a word of mouth business that's -- it's a fair game. You take the best care of the patients and customers, they tell their friends, they come back and it's a fair game. And so we have always liked the majority of our growth to come from improvements in customer count, not from average ticket. We've seen too many of our competitors get in sort of a short-term issue and then drive their business with average sale, get addicted to that. And frankly, we benefit from that because it creates a price gap between us and them in a way that is favorable to our customers. Do you want to go into a little bit more detail on...

Yes. So pre-pandemic let's split it between glasses and contacts.

Yes. And if you could just give us the average ticket numbers, that would be fine.

That would great. Just throw them up on the screen, David, if you don't mind. So pre-pandemic average ticket for eyeglasses, a pretty stable number. In fact, when we would see it edge up, we would dive into that, making sure that we didn't have a new store manager or a new district manager somewhere that was propping ticket up. So eyeglass ticket was pretty steady, and we like it there because it fits our value proposition. The contact lens ticket has been increasing slowly over the last few years with just customers choosing to go to daily modality or more comfortable lenses. So we have seen that edging up, but that's not a selling thing. That's a doctor-patient decision. In pandemic, with stimulus, with pent-up demand, tickets elevated substantially. And they remained elevated for a solid year and then sort of declining in the second half of '21. We thought they would find a bottom closer to where they were pre-pandemic, but they bottomed earlier than that. And we think that's a function of blue light. But we did, we have taken a little bit of pricing changes around the edges in later in the fourth quarter that once ticket bottomed, it actually served as a lift. So we have seen ticket completely stabilized, lift a little bit coming off fourth quarter. Now as we get into second quarter of this coming year, it was super elevated last year because of the stimulus timing. So we're going to still have a tough comp on ticket Q2 of '22, but we are actually higher than we were at the end of the fourth quarter, and we're happy to see ticket stabilize a little higher than we expected it to. Underneath all of that, customer traffic has been positive each quarter, excluding the quarter where we closed all of our stores. So ticket has made a lot of movement, happy with where it stabilized and a little surprised with where it stabilized.

Anything to add, Reade?

No.

You will soon anniversary this sharp increase in the ticket in due in part from the stimulus. The knee-jerk reaction is whenever a business goes through a period of decline or consolidation is to panic or engage in behavior that could be a little bit more shortsighted. How do you keep the business more focused on the long run? Don't do anything rash to juice advertising to try and maintain the comp performance?

We've benefited -- you hear a lot of funny things about private equity, and we went through 14 years with Berkshire Partners here in Boston and KKR. And for us, there was always a real long-term orientation. They -- Berkshire Partners, when they bought us said, "Run the business as if you're going to give it to your children", which it was a lovely and I don't think...

20 years, you could give it to your children.

But actually, that is a benefit when you say -- when as a career, you say, yes, it's been 20 years, and it's going to be a long, long time into the future, and you have to live with all the pieces and you have patients and can organize it that way. And I've done optics for 30 years in here and abroad, and you see how people get into trouble. And we've always had a very long-term orientation. And again, we're dealing with a customer whose eyes go bad, and then they come to us to solve that problem, and you know that's going to happen. That's confidence inducing.

Yes. Without a doubt. And Patrick touched on this in his response. You have taken some price increases recently. It's an interesting dynamic because the frames represent a small portion of the total transaction. The largest piece of your cost is the optometrist, and you are feeling some wage pressure. And we'll get to that in a minute. How do you carefully balance that pricing power with being the low-cost provider in the marketplace, at the same time, you have to balance the needs of the business and shareholders to pass along some of those price increases or those cost pressures to the consumer?

We're very judicious and we like for there to be a big gap so that people leave saying, "Wow, I really saved a lot of money", and that's -- and we organize around that. Our lead offer at America's Best is 2 pairs of glasses for $69, and we throw in the eye exam for free. And that has been our offer for 20 years. It has not changed in 20 years. Everything is on the table. We live in a weird unprecedented world. We haven't seen inflation like this. So there are no sacred cows in the world. But we try for real consistency.

And this is a market that -- where there's not as much transparency as there might be in some other areas of retail...

It's confusing. It's hard to do direct pricing.

How do you do that? How do you maintain -- ensure that you're maintaining your price capture -- especially there are some, well, large players out there. And then there's a lot of small mom and pops. So how are you able to -- ensure that you're maintaining...

We have studies on that. And I'll just say, so because it's hard to compare the patient and customer come in generally with a dollar figure in their mind based on their prior experiences, and if you can deliver that or below, they're overjoyed. And if you're too much over that, that's the problem. So it's managing relative to their expectations.

And without getting too deep into the secret sauce, how does the pricing strategy work? Do you -- can you take a little bit more price on some of the higher-end frames while retaining true to your core customer proposition, which is $69.99 for 2 lenses at an eye exam...

2 glasses. Yes, 2 pairs.

2 glasses in an eye exam. Or can you -- do you tend to take it across the assortment?

We look at different things. Oftentimes, you might say, "Oh, here's a lens option. You could add $1 or $2 here or there." We have, at times, sort of changed the price on our highest tier, which is fancier designer frames, we have those also. You don't get Oakley at 2 for $69. That doesn't work in that way. But there are different places. The eye exam is free if you buy 2 pairs of glasses. And so that's a big source of value because I wouldn't be surprised if anyone in this room the last time they got an eye exam was paying well over $60 or $70. And if you've got a contact lens exam, I wouldn't be surprised if the price was like $120 to $150, $180. So it's easy to compare even if you're going to places like Costco.

And so some of these big spenders could use the value proposition of America's Best and Eyeglass World. I want to talk a little bit about customer acquisition, given how important it is to feeding the model. In the last few quarters, you've stepped up advertising a little bit. What channels are you finding are most effective? How has that evolved over the last few years? And how do you expect to continue to maintain this level of customer acquisition in a very dynamic market?

So optical is a marketing-driven category. So a bunch of laws changed in the late '70s and early '80s, making it possible for optometrists to advertise for the first time. This is when the growth of chains like Lenscrafters came about and a lot of brand marketers like myself and a lot of P&G folks and all hopped into the category, and it's been marketing-driven ever since. The evolution even in, say, the past 10 years was always historically a television -- the network television-oriented game, and then sort of the next step of the evolution was taking the top of the funnel with network TV and going to the bottom of the funnel with Google. And then the latest iteration of the evolution has been sort of filling in the full funnel and seeing the different ways that sort of mid-funnel spending can make your bottom of the funnel spending more efficient. We spend a lot of time and energy and money with Google and paying attention to that and getting ever better at that. But we still -- we're still on network television. We have a ad campaign that is well-loved with an owl telling people that they paid too much for their glasses if they didn't buy them from America's Best. I will say when we put that ad campaign on, the business just took off. I told our private equity owners at the time, we'll probably be running that campaign for about 20 years. And I think 10 years in, we're still going to be running it for at least another 10 years.

And has it extended well to new advertising channels like social media?

It's great. It's great. Yes, we'll have cute things like the owl talking about, "I was thinking of buying online and then I ate my mouse", and things like that. But it's a very funny campaign. Our agency is great. It's the same group that invented the Chick-fil-A Cows, and it's just fun. And people coming to our stores all the time saying, "I just love the owl." And so it's very nice, and yes, so...

If the owl...

Yes, I'm very proud of that ad campaign.

Yes, if the owl doesn't have its own or her own TikTok channel, you might need to...

Correct.

Or might need to be something that we look into. Eyeglass World has been a real nice growth source for the company, and you've recently increased the number of locations you think you can open under the Eyeglass World model. So can you give us a sense for what's changing that's allowed the growth opportunity to expand? Why is this the right time to accelerate the growth of Eyeglass World?

And for those who don't know sort of America's Best, 850-plus stores is very low cost, 2 pairs of glasses, eye exam included, 2 pairs for $69, it's a -- as we say, it's not just a great deal, it's America's Best. That's the tagline on the ad.

It works.

Eyeglass World is our second brand. It's more of a traditional superstore. So it's a larger store, more frames, more designer frames and a lab in every store offering same-day service. So I spent the first 10 years of my career from 1986 to 1996 with LensCrafters, when it was more of a mainstream brand. It since then has gone much more upscale or much more sort of boutique-ee and designer-ee along the way. But it's sort of -- it's the LensCrafter circa 1990. It's a fast turnaround service, a big store broad selection and it's just as resonant today. For a while it took us -- it took us a while to get to the point where the return on invested capital was the same as America's Best, and we achieved that sort of mid last year, the sort of post-pandemic, both because of the pandemic consumer, but actually more so because we finally got the right constellation of operations leaders and the right focus of the advertising. But everything came together in a lovely way just when we reopened our stores. And now the return on invested capital of these stores is the same as America's Best. And so this year, we decided to up the number of stores that we build. We've been traditionally building 75 to 80 -- sorry, 70, 75 stores a year. We now are saying we're going to open at least 80 stores this year, and we've doubled the number of Eyeglass Worlds that we're going to open. And we have a new prototype that's really exciting, and we think it's even better. So at sort of the Eyeglass World, which is always sort of the younger sibling, is now sort of proving its older sibling that they are in the game and it's really exciting. It was a great year. So in essence, we have 2 growth brands. We think we can double our white space. We have 1,280 stores now, and we think that America needs at least twice as many of America's Best and Eyeglass World, and that's -- if we don't squirt out other models, that could increase it even further and we're experimenting with some of those as well.

And Patrick, has there been cannibalization between the 2 brands when they're in close proximity?

Not to a high degree. We look at that as we open those stores, I was going to add, the return on invested capital journey for Eyeglass World worked out really well. We just didn't get there the way I thought we would. So 2 or 3 years ago, we were focused on improving those returns to get them closer to AB. I never thought they would get like right on AB. And the teams that were looking at that and working on that, were really focused on how do we take more of the IC out of the front end, right? Can we make the lab smaller? Should we have the lab? Could we make the stores smaller? We really never got there. What was going on at the same time was, as Reade said, we had improved management, we got the right selection and sales and comps were just doing fantastic. And actually, with same-day service and a larger store, I think Eyeglass World really came into its own as we reopened our stores in June of 2020. And so our returns improved, not because of cool, fancy things we did and engineering around the capital level, they improved because the performance, the top line performance and the flow-through performance of the business substantially improved. And at the same time, AB was improving across that time frame as well. But at this point, we're now indifferent in terms of opening stores...

I don't care if they're right down the street from each other or right across the street from each other. They both can thrive together.

And they draw upon a different customer set.

Yes. Yes, it's a more time-sensitive, more fashion-conscious customer segment.

Well...

Like yourself.

That's right.

Yes. Right.

I was seeing -- talking about Reade, I mean pretty good looking eyeglasses there. Now that this is going to accelerate its growth, should we expect to see more advertising resources and other resources being dedicated to driving that growth?

So we manage them as separate brands. America's Best is at a scale now that we do network advertising for that. Eyeglass World is still sort of local advertising in the local markets. So we don't -- we haven't quite gotten to that network effect. It will probably be a little while before we do, you've got -- you've really got to be in like L.A. and New York to really get to the point where network advertising is really effective for you. But yes, it's, again, heavily locally-oriented TV and the same digital components.

Yes. Shifting gears to the managed care side of the business, which at the time of your IPO about 5 years ago, you said was 30% or so of the total. We assume that that's slightly increased probably in the low to mid-30% range of the business now. What is it going to take to continue to drive that as a higher percentage of the business because we know that as consumers come in and they've got the support of managed care and support of vision insurance, they spend a little bit more, so that's good news for the business.

So we have historically always been underpenetrated in vision insurance. Partially, it's because when we bought America's Best 15 years ago, they didn't even accept vision insurance. So we were starting from a pretty low base. But we think that we'll always be under-penetrated in vision insurance because we're going to be over-penetrated in noninsured customers, because when it's your own money, you seek out real value. And right now, about half of American adults have vision insurance and half do not. The half that do not are saying, "Where can I get the most for my money?" And they find us, and so that is still the majority of our business. Having said that, your Vision Care insurance goes further with us. If you have $100 frame allowance, you can get better frames from us. So it's a better place to spend your insured money, and our market share amongst insurers, they tell us has been going up steadily. We believe our vision insurance business will continue to grow. And historically, except for the year of the pandemic when a lot of people lost their jobs and lost their insurance, except for that year, it's continued to grow steadily, and we expect that to continue to grow steadily. And we are totally agnostic. We are just as happy to have an insurance customer come in, it is a higher average sale and so the way it works on the P&L is sort of the profit per customers is just about the same. You just sort of get there in sort of different ways.

Is there a strategy to continue to increase access to that market? Or like you said, you're agnostic, whatever it is, it is. One would think the opportunity would be great because, like you said, the dollars can go further when a customer comes in and does have vision insurance.

We benefit from the advertising, America's Best especially as a brand. Eyeglass World is a brand in the local market and the typical customer journey is you start to feel your vision is going bad, you sort of deny it for a little while because like it means you're getting older and you don't want to realize that, and then you get to a point where you can't deny it any longer and you have to address it. And so if you have vision insurance, you then go to your directory, you figure out where you can use your insurance and you put in your ZIP code or use whatever locator and the insurance company says, okay, here's the closest one to you and next closest, it's all by geography, you see our brand names, Americas Best, Eyeglass World and you say, "Oh, that one's nearby," you benefit from the advertising and the brand awareness that comes of that. And we typically are in high traffic power centers and strip centers. We're often next to Marshalls or T.J. Maxx or in a Walmart parking lot. So you've probably seen our stores, and it all registers. So -- and that's the way that we tend to build market share in the managed care way. They know the brand, they've seen the store and then we pop up on their directory.

Yes. Over the time we spent together over the years, you've talked about your customer being just as much as the end market customer as it is the optician, and how important that is to this model. It's been a very tight labor market for the optometrist. How do you see this playing out? You've made some wage investments? Is this going to be a perpetual source of pressure? Do you feel like you -- now that you've made some investments in the optometrists that you can -- you'll get to a point where you're leveling off? Or is it going to be, as far as the eye can see, excuse the pun...

Oh wow, it's lame.

I was waiting on it.

So as we went public just about 5 years ago, and what we said at the time was we -- our process starts with an eye exam, eye exams are given by optometrists. And although we have the largest network of employed optometrists in America that's between 6% and 7% of all optometrist practicing in America are practicing with us. We have high retention rates and we have strong ability to recruit. We have never said we have enough optometrists. We are always looking for more optometrists, and we do not anticipate we will ever from any stage, say, "Great news. We now have all the optometrists we want." That's just not the business we're in. Having said that, there are a variety of things we are doing to improve retention, to improve recruitment, and we feel we're getting ever better at of that, and we think the employment model, which is our most common model, is ever more the model of choice for optometrists going forward.

What are some of those examples of things you're doing to make the experience better for the optometrist?

You just won't believe how simple some of these things are like in terms of recruitment. It always starts with a practice visit. Sort of he now has sort of a very set style and mode of practice visits. And then we have -- we make sure that immediately after they leave, we call them, this is a hard job figuring this stuff out and say, "How was it? Did you like it? Did you enjoy it?" But sort of, again, so much of associate management and culture building is about welcoming people. I mean, just basic sort of -- basic things, our parents taught us about, yes, just make sure to be nice and follow up and that sort of thing. It's basic stuff like that. I would say if you're looking for something more tangible, we've mentioned sort of remote medicine here and there, we -- so to define terms, because Telemedicine is such a big phrase. When we talk about remote medicine, we talk about a patient sitting in our exam room in a store surrounded by lots of expensive equipment, lots of white boxes that do things like test for glaucoma and things like that, and patient in our room, doctor who's licensed in that state sitting wherever. Doctor live on screen talking to the patient as if they were in the room, they're just not in the room. We believe this is a mode of practice that many optometrists are going to want to do in the future. It provides great flexibility during different phases of life, and a lot of doctors who were doing it with us now are very much enjoying it. It has a lot of different benefits, including recruitment and retention. And it makes for a much more efficient experience for the doctors overall. And patients are all in. I mean, this day and age, a lot of people are hesitant about being in a small room with somebody 6 inches from their face sort of thing after what we've all been through in the pandemic. So we see this what we announced last week is we have 100 stores doing this now, that we're going to have at least 200 by the end of the year, and we see this as a mode of practice that will help us to attract and retain doctors going forward.

What percentage of eye exams in the industry do you think are done remotely today? And where do you think that will be 5 years from now? And do you think National Vision will over-index to that industry-wide number or under-index?

I bet you, it's less than 1% are done -- yes, it's less than 1% are being done that way now. I don't have an exact number for the future. I do -- I'm very confident that we will over-index.

You'll over-index.

Yes, we're over-indexed. We're the largest network of employed doctors. We control all bits of this. So often the doctor is a leasing doctor. So often, you've got to get all the connection points on the IT to make this work. You have to have a commitment to it. And I believe -- I cannot prove this, so it's not in our 10-K, I believe, and I'm pretty sure in my heart, that more Americans get their eyes examined underneath an America's Best banner, than underneath any other banner out there. So more than LensCrafters or a Walmart or a Costco or a Pearl or whatever, that right now where America goes to get their eyes examined is America's Best. So logically, we should be a large player in this. And again, the process of buying eyeglasses and contact lenses starts with an eye exam. So if we are controlling that debt, it will be ever better.

And is it fair to think that over the next 3, 4, 5 years as this becomes a bigger portion of the total that, that will help alleviate some of the wage pressure because you'll be able to draw on a wider potential audience of optometrists?

It will improve the efficiency of a doctor because they will be able to be taking exams at multiple stores. There's never a no-show when you have -- when you're doing remote. If you're standing in the store and somebody that doesn't show up, you're standing there doing nothing for that slot. If you're online, you're just saying, which is the next one. I'm just taking it from the screen. So there's never a no-show. It's a more efficient ecosystem.

So Patrick, let's translate this to the financial profile of the business, we'll tie it with other factors. There's -- since you've been public, there's been a lot of pressure on the leadership team to generate margin, we see you generated fantastic margin expansion last year. You consistently messaged that it's not necessarily the new norm. What is the new norm? And how should we think about the drivers of potential margin expansion from here?

Yes, we shared guidance a couple of weeks ago that reflected at the midpoint, a small expansion amount over 2019 after we had seen fairly substantial. And honestly, that guide was reflective of the impacts to the business in January and February for COVID and weather. When you look at just that, that was probably more than a turn. It was like 100 basis points for just that 1 factor. So I think that as we were contemplating our guidance in December prior to the exact timing of Omicron, I think that the guide we would have shared at that point would have probably looked a lot more like margin expansion through the pandemic. I've talked about the second half of this year. I do think we're going to see better margin performance. The first half of the year, we're growing over 53% comps. The second half, we're growing over 1 to 2 comps. So there's a far easier over. Second, we're going to lap the timing of some of those wage investments last year that were pointed at both doctors as well as associates. We -- the summer months of the year are the months where our new grad doctors come into the business. And so we usually have some of our best capacity months, doctor capacity also in the second half of the year. So all those things come together, including remote medicine benefits and makes me feel pretty good about second half. I think that when we get beyond second half and look back, you can invite me back to the stage next year, and I can say...

We'll be here.

I can say, let's compare the second half of '22 back to the second half of '19. And let's look and see where margins are. That's my expectation. That's our guidance. That's our plan. I do think right now, we just have a couple more of these tough sledding quarters where we're growing over 53% comps, where we've made wage investments, and so I do think there is the opportunity to see better margins. Now we've never set a stake in the ground long term. We certainly want to push our margins at least into the high single digits. And maybe that can even get higher over time. But it all starts with stores, comps, managed care tailwinds plenty of doctor capacity. I do think the long-term margin objectives are still absolutely intact. Last year, we also had a -- we tried some things with advertising that delevered during some of the quarters of last year. We now have probably a lot more intelligence on where our real large impact channels and levers are from CRM for advertising, I think we'll see good leverage on advertising as we get into the second half as well.

Reade, National Vision is the quintessential business that does well by doing good. ESG has become front and center in that conversation on a lot of investment considerations. How does ESG play a key role in National Vision's operations and its strategy?

Michael, I like the way you set that up because if you think about what's going on in our stores, is we're providing access to low-cost health care. We're providing access to eye exams. And although most of us who are very healthy, go to get an eye exam to get a prescription that that's curvature of the lenses or the contact lenses right, so you can see, and yes, that is most of what an eye exam is. But it is also an eye health check. The eye is the only place you can actually look into the body. Eyes are attached to the brain, you actually get to look into nerve endings that are attached to the brain and there are about 260 different diseases, some of them eye diseases, and some of them are general health diseases like diabetes and hypertension that can be diagnosed through an eye exam. Our customers, as I've said, are predominantly uninsured. It is not uncommon for our doctor to be the first person to tell somebody that they have diabetes themselves, or maybe they have hypertension. It's not crazy uncommon for them to be told they need to go to an emergency room right now because something very serious is going on. This happens through looking into the eye. This is happening in over 1,000 stores that are like sitting there next to a Marshalls in a strip center. But this is where an uninsured customer feels comfortable going in. So we are providing access to health care that's vital health care, that's life-saving health care, it's vision saving health care as a business. We have historically for a long time said we are going to take the success we have and find ways of bringing sight to low-income communities in America and around the world where we find ways of getting glasses to homeless people and to try to solve the problem of the lack of glasses throughout the world amongst poor populations. A problem -- get this 15% of the world's population, 1.1 billion of the 7.8 billion people on this planet have an eye problem like you, and you, and you and me that needs a pair of glasses and they cannot afford a pair of glasses. Imagine, you all, who I can point at, growing up in a poor country and having your eye problem and not being able to solve it. I'm pleased that last year, we made investments that will help, ready, 1 million people to be able to see and we're proud and pleased with that. But historically, we have consistently said, if you have -- dealing with the problem involving 1.1 billion people around the world, yes, you can be proud of 1 million because it's up a lot versus the prior year, but this is a life's work to try to see what we can do to pull together the global community to eradicate the problem of the lack of glasses for those in need a lot of us here. That is a consistent long-term piece, and that's been with us before the topic of ESG ever came up. When we became public, all of a sudden people like we realized, well, like we have really low ESG ratings. I don't understand this, like we've devoted ourselves for years to try to eradicate a major public health issue throughout the world. Like doesn't anyone care about that? But apparently, you have to do a lot of things to get rated by the -- like you have to publish a corporate responsibility report, and it's good to have a greenhouse gas report and to have goals relative to your climate footprint. All of which I believe in and we have been doing, and in fact, over the past 2 or 3 years, we have caught up with that and are doing the things to get credit for a lot of the things we've already done. And frankly, to expand our social mission into areas more involved with climate change and the like. And we're pleased as punch that the various rating agencies have now taken note of that, and now we've got sort of scores to be proud of. I know they're all going in the right direction. But it came about because, at our core, we're about providing access to health care for underserved populations as a business, and that we take that success and try to devote it to ever larger numbers. And it's really fulfilling life's work, and it's really nice. Our people all understand this that the success we have as a business goes to help some of the poorest people in the planet. It's very, very nice. And each of our stores has a bunch of -- they can give out free glasses to anyone who they feel is in need, and it's really lovely and it creates lovely virtuous cycles.

You have a lot to be proud of. I told you the best for last, and they delivered. So please join me in thanking...

Well, one thing, I can't let a guy who likes socks so much -- so a few years back, we decided that we are spending just far too much time on this part of the face, this part of the body, and we needed to spend more time on the other side of the body, so we started to just design and have annual company socks. This is the third year of company socks, nice eyeglasses, logos and the like. And anyone who appreciates a good pair of socks...

There you go.

Should have their own National Vision socks there...

There you go. This is so exciting. Feels real good.

And I'm sorry, our Eyeglass World group did so well last year, we actually got them all shoes. And all the shoes are arriving this week, next time. Next time you can be have some Eyeglass World shoes.

You can be sure. What a wonderful way to conclude our conference. Thank you so much to the team from National Vision. Please join me in giving them a nice round of applause.

Good. And I'll be doing eyeglass cleanings for anyone who wants some right over here at the -- afterwards.

[indiscernible] I know.

Okay. Good. All right. Thank you very much. Yes.

Thank you.

Thank you.