National Vision Holdings Inc.
03/04/2026 | Press release | Distributed by Public on 03/04/2026 05:08
Annual Report for Fiscal Year Ending January 3, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains management's discussion and analysis of our financial condition and results of operations and should be read together with the consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K (this "Form 10-K"). This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section included in Part I. Item 1A. in this Form 10-K, as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read "Special Note Regarding Forward-Looking Statements" in this Form 10-K.
We conduct substantially all of our activities through our indirect wholly-owned subsidiary, NVI, and its subsidiaries. We operate on a retail fiscal calendar that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References herein to "fiscal year 2025" relate to the 53 weeks ended January 3, 2026, references
herein to "fiscal year 2024" relate to the 52 weeks ended December 28, 2024 and references herein to "fiscal year 2023" relate to the 52 weeks ended December 30, 2023.
The disclosures contained in this Form 10-K are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. For further information, please see "Risk Factors" and "Forward-Looking Statements."
Overview
We are one of the largest optical retailers in the United States ("U.S.") and a leader in the value segment of the U.S. optical retail industry. We believe that vision is central to quality of life and that people deserve to see their best to live their best. Our mission is to help people by making quality eye care and eyewear more affordable and accessible. We achieve this by providing eye exams, eyeglasses and contact lenses to consumers across the nation. Our range of quality product offerings at multiple price points makes us an attractive destination for consumers of all income levels. As of January 3, 2026, our 2025 fiscal year end, we reach our customers through a diverse portfolio of 1,250 retail stores across four brands, our associated omni-channel consumer websites, and our dedicated e-commerce consumer website.
Brand and Segment Information
As of January 3, 2026, our operations consisted of one reportable segment. During fiscal year 2024, our Walmart store operations, including our former Legacy reportable segment ("Legacy") and components of our AC Lens operating segment met the requirements to be classified as discontinued operations.
•Owned & Host - As of fiscal year end 2025, our owned brands consisted of 1,057 America's Best Contacts and Eyeglasses ("America's Best") retail stores and 122 Eyeglass World retail stores. In America's Best stores, vision care services are provided by optometrists employed by us or by independent professional corporations or similar entities. America's Best stores are primarily located in high-traffic strip centers next to value-focused retailers. Eyeglass World locations offer eye exams, provided by optometrists employed either by us or independent professional corporations or similar entities, and have on-site optical laboratories that enable stores to quickly fulfill many customer orders and make repairs on site. Eyeglass World stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers. Our Host brands consisted of 53 Vista Optical locations on select military bases and 18 Vista Optical locations within select Fred Meyer stores as of fiscal year end 2025. We have strong, long-standing relationships with our Host partners and have maintained each partnership for over 20 years. These brands provide eye exams primarily by independent optometrists. All brands utilize our centralized laboratories.This segment also includes sales from our America's Best, Eyeglass World, and Military omni-channel websites.
Our consolidated results for all periods presented in this Form 10-K also include the following:
•Corporate and other - Our corporate and other category includes the results of our dedicated e-commerce website, which sells contact lenses and optical accessory products to retail customers, and recognizes revenue when products have been delivered to the customer and our managed care business conducted by FirstSight, our wholly-owned subsidiary that is licensed as a single-service health plan under California law, which issues individual vision plans in connection with our America's Best operations in California. Our "corporate and other" category also includes unallocated corporate overhead expenses, which are a component of Selling, general and administrative expenses ("SG&A") and are comprised of various home office expenses such as payroll, occupancy costs and consulting and professional fees. Corporate overhead expenses also include field services for our four retail brands. Other expenses included in this category include certain non-cash charges, including asset impairment, stock-based compensation expense, and the impact of certain events, gains, or losses excluded from the assessment of segment performance.
•Effects of unearned and deferred revenue - Reportable segment information is presented on the same basis as our consolidated financial statements, except reportable segment revenues and associated costs applicable to revenue which exclude the effects of unearned and deferred revenue, consistent with what our chief operating decision maker ("CODM") regularly reviews. We present the effects of unearned and deferred revenues separately from our reportable segment information. See Note 15. "Segment Reporting" in our consolidated financial statements. Deferred revenue represents the timing difference between the point of sale and when services related to product protection plans and eye care club memberships are performed. Increases or decreases in deferred revenue during the reporting period represent cash collections in excess of, or below the recognition of, previous deferrals. Unearned revenue represents the timing difference between the point of sale transaction and delivery/customer acceptance, and includes sales of prescription eyewear during approximately the last two weeks of the reporting period.
Trends and Other Factors Affecting Our Business
Historically, our business model primarily targeted lower-income consumers with a go-to-market strategy focused on merchandise and messaging of the lowest price. We evolved our operating model in light of the impact of Covid to address changing consumer and doctor preferences, including by introducing cutting edge remote telehealth capabilities, which are now installed in over 800 of our locations. We believe this differentiator greatly improves our ability to provide consistent access to patient care across our network of stores. In fiscal 2024, we began implementing transformation initiatives designed to accelerate long-term growth and strengthen profitability, including new additions to our executive leadership team, continued expansion of exam capacity, new traffic-driving initiatives.
In 2025, we embarked on the next phase of our transformation, focused on the rapid modernization of our business in the context of contemporary consumer needs and wants. Our strategy is focused around creating a more joyful consumer experience with refreshed merchandising, updated marketing and brand assets, new in-store technologies to support the customer journey, and an updated pricing architecture, all of which allow us to better serve our existing customers and expand our target consumer demographics. During 2025, as an embodiment of our transformation, we refreshed the National Vision and America's Best brand identities. We also introduced a new America's Best brand promise, "Every Eye Deserves Better," which better reflects our customer mix. These consumer-facing strategies are paired with an increased focus on cost optimization and operating margin expansion, all of which are intended to drive the outcome of a stronger core business and improved operating results.
The overall economic environment continues to be challenging and macroeconomic factors that may affect customer spending patterns, and thereby our results of operations, include inflation, employment rates, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and policies, fuel and energy costs and overall consumer confidence in future economic conditions, as well as global political, socio-economic, cultural, and geopolitical uncertainty. The effects of the current macroeconomic environment and geopolitical uncertainty, resulted in reduced customer demand in 2025 and have caused shifts in consumer behaviors and preferences, which impact the demand for our products. As a result, the predictability of recurring purchase behavior for the future remains uncertain, primarily for the cash pay consumer.
We operate in the highly competitive and fragmented U.S. optical retail industry. We face competition from mass merchants, specialty retail chains, online retailers and independent eye practitioners and opticians, along with large national retailers. Increased consolidation activity in the industry may enable our competitors to benefit from purchasing advantages and the ability to leverage management capabilities across a larger business base. Along with our competitors, we are affected by a number of various trends and factors, including, but not limited to, economic conditions, availability of vision care professionals, inflation, consumer preferences and demand.
Our ability to continue to attract and retain qualified vision care professionals impacts exam capacity and our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams. We believe factors such as an increasingly challenging recruiting market (in particular for new graduates), preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas caused constraints in vision care professional availability and therefore exam capacity in recent years, which may continue. As a result, recruiting and retaining optometrists has become more challenging and the costs to employee or retain optometrists have increased and may increase further, potentially materially. Targeted wage investments, including increases in compensation for our optometrists and associates, and flexibility initiatives have impacted our costs applicable to revenue and SG&A expenses. We anticipate that wage pressures in certain markets may continue to some degree in 2026. Wage investment pressure and increases to costs applicable to revenue from increases in raw materials prices may not be able to be fully offset by leverage from revenue growth, productivity efficiency and, as appropriate, various pricing actions. We are continuing to strategically invest in recruitment and retention initiatives, including flexible adjusted work schedules, along with continuing our implementation of remote medicine technologies, which has expanded our offerings while also increasing costs.
We believe remote medicine not only helps provide more access to eye care for patients, it also helps address constraints in exam capacity. We anticipate continuing the investment in remote medicine primarily in America's Best stores in the near term, adding select locations where feasible and advantageous and depending on the state-by-state regulatory
environment. While the remote medicine and EHR platforms have increased exam capacity, revenue and profitability, we have experienced higher costs applicable to revenue as a percentage of revenue, when compared with in-store exams.
In addition to the central factors impacting our business outlined above, we have identified the following key drivers, challenges and risks on which we are focused and which are detailed below.
Inflation
Elevated inflation can result in increased costs and greater profitability pressure for us. While pressures from increases to the price of our raw materials have had an impact on our costs applicable to revenue in fiscal year 2025, we have been able to offset these pressures with efficiencies in our laboratory network, pricing actions and lower freight costs. We anticipate that pressures from increases to our raw materials prices could have an impact on our costs applicable to revenue in fiscal year 2026. Such an inflationary environment and labor market challenges can also result in wage pressures in certain markets. Wage investments as a result of inflation and an increasingly competitive recruiting market for vision care professionals that became more acute during the COVID -19 pandemic and related effects have had, and may continue to have, an impact on our profitability.
New Store Openings
We expect that new stores will continue to be a key driver of growth inour net revenue and operating profit in the future. Our results of operations have been and will continue to be materially affected by the timing and number of new store openings. As stores mature, profitability typically increases significantly. The performance of new stores is dependent upon factors such as the availability of optometrists, implementation and operation of remote medicine technology, the time of year of a particular opening, the amount of store pre-opening costs, labor and occupancy costs in the specified market, level of participation in managed care plans, and location, including whether they are in new or existing markets. During fiscal 2025, we opened 33 new stores, and we plan to open approximately 30 to 35 new stores in 2026, primarily comprised of America's Best stores, after which time we expect to return to our more recent store opening cadence as strategic initiatives begin to take hold.
Comparable Store Sales Growth
Comparable store sales growth is a key driver of our business. Many factors affect comparable store sales, including:
•consumer confidence, preferences and buying trends and overall economic trends including inflation;
•the availability of optometrists and other vision care professionals;
•advertising strategies;
•participation in managed care programs;
•the recurring nature of eye care purchases;
•our ability to identify and respond effectively to customer preferences and trends;
•our ability to provide an assortment of high quality/low-cost product offerings that generate new and repeat visits to our stores;
•foot traffic in retail shopping centers where our stores are predominantly located;
•the customer experience we provide in our stores;
•our ability to source and receive products accurately and timely;
•changes in product pricing, including promotional activities;
•the number of items purchased per store visit;
•the number of stores that have been in operation for more than 12 months;
•impact of competition and consolidation in the U.S. optical retail industry;
•impact and timing of weather-related store closures; and
•public health emergencies which may exacerbate the effects and relevant risk exposures listed above.
A new store is included in the comparable store sales calculation during the 13th full fiscal month following the store's opening. Closed stores are removed from the calculation for time periods that are not comparable. In the past, we have closed stores as a result of poor store performance, lease expiration or non-renewal and/or the terms of our arrangements with our Host partners.
Managed Care and Insurance
Managed care has become increasingly important to the optical retail industry. An increasing percentage of our customers receive vision care insurance coverage through managed care payors. Our participation in these programs represent an increasingly significant portion of our overall revenues and represented 42% of our overall revenues from continuing operations in fiscal 2025. While we have relationships with almost all vision care insurers in the U.S. and with all of the major carriers, currently, a relatively small number of payors comprise the majority of our managed care revenues, subjecting us to concentration risk. As our participation in managed care programs continues to expand, we have incurred andexpect to incur additional costs related to this area of our business. Our comparable store sales growth as noted
above as well as overall future operational success could depend on our ability to negotiate, maintain and extend contracts with managed vision care companies, vision insurance providers and other third-party payors, several of whom have significant market share. Coverage and payment levels are determined at each third-party payor's discretion, and we have limited control over a third-party payor's decision-making with respect to coverage and payment levels. Coverage restrictions and reductions in reimbursement levels or payment methodologies may negatively impact our sales and profits. In addition, as our participation in managed care programs continues to approach overall industry penetration levels, we expect our associated managed care revenue growth rate to slow over time.
Through our point-of-sale system and our back-office electronic data interchange ("EDI") capabilities, we attempt to create a seamless transactional experience for our managed care customers and we have increased training for our store associates with this goal in mind. From time to time, vision care insurance payors may make changes to their benefit designs or claim systems, or experience system outages. Such changes or outages may require us to update our processes and could impact our ability to submit claims or timely receive reimbursements from our managed care partners. As such, we have worked proactively with our larger vision care insurance payors to implement technology to improve eligibility and benefit verification processes via application programming interfaces ("APIs"). We have implemented such APIs with some of our largest payors and have seen improvements in the customer experience and reductions in claim errors that would otherwise result in rejections and potential write-offs.
Infrastructure Investment
Our historical results of operations reflect the impact of our ongoing investments in infrastructure to support our growth. We have made and continue to make significant investments in information technology systems, including those to support our point-of-sale system, ERP, CRM, e-commerce platforms, supply chain systems, marketing, and personnel, as well as experienced industry executives, and management and merchandising teams to support our long-term growth objectives. We intend to continue to make targeted investments in our infrastructure to support our growth and continue the digitization of our stores and corporate office.
Pricing Strategy
We are committed to providing our products to our customers at exceptional value. We have historically employed a simple, low price/high value strategy, seeking to balance our pricing and growth in a way that consistently delivers savings to our customers. We are continuing this commitment to value, while at the same modernizing our pricing strategy to maximize that value across a broader range of consumers. We have taken and may continue to take pricing actions and introduce limited-time promotions or new offers designed to increase demand traffic, awareness and drive sales.In fiscal 2025, we implemented price increases to each of our America's Best and Eyeglass World opening offers and continued to evolve our product mix to include a greater percentage of frames at price points over $99. We believe that these changes will enable us to continue to offer the best possible value and service to our customers at prices that allow us to maintain our brands' strong value propositions in the marketplace. Inflationary pressures, including elevated wages, consumer confidence and preferences and increased raw material costs, could impact our profitability and lead us to attempt to offset such increases through various pricing actions.
Interim Results and Seasonality
Historically, our business has realized a higher portion of net revenue, operating income, and cash flows from operations in the first half of the fiscal year, and a lower portion of net revenue, operating income, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to annual health insurance program start/reset periods and predictable consumer propensity to seek eye care and eyewear.
With respect to our fourth quarter results, compared to other retailers, our products and services are less likely to be included in consumers' holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year. Additionally, although the period between December 25th and the end of our fiscal year is typically a high-volume period, the net revenue associated with a significant portion of orders of prescription eyeglasses and contact lenses during that period is deferred until the following fiscal period due to our policy of recognizing revenue only after the product has been accepted by the customer, further contributing to higher revenue results in the first half of the year. Our quarterly results may also be affected by the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, the timing of certain holidays, and the timing of weather-related store closures.
For fiscal years 2025 and 2024, approximately 25% and 24% of our revenue was recorded in the respective fourth quarters, but approximately 26% and 25% of annual SG&A costs were recorded in the respective fourth quarters of these fiscal years.
How We Assess the Performance of Our Business
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use to determine how our consolidated business and operating segments are performing are net revenue, costs applicable to revenue, and selling, general, and administrative expenses, which are described further in Note 15. "Segment Reporting" and Note 1. "Business and Significant Accounting Policies," to our consolidated financial statements included in Part II. Item 8. of this Form 10-K. In addition, we also review store growth, Adjusted Comparable Store Sales Growth, Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS.
Net Revenue
We report as net revenue amounts generated in transactions with retail customers who are the end users of our products, services, and plans. Comparable store sales growth and new store openings are key drivers of net revenue and are discussed below. Also, the timing of unearned revenue can affect revenue recognized in a particular period.
Costs Applicable to Revenue
Customer tastes and preferences, product mix, changes in technology, significant increases or slowdowns in production, and other factors impact costs applicable to revenue. The components of our costs applicable to revenue may not be comparable to other retailers.
Selling, General and Administrative
SG&A generally fluctuates consistently with revenue due to the variable store, field office and corporate support costs; however, some fixed costs slightly improve as a percentage of net revenue as our net revenues grow over time.
New Store Openings
The total number of new stores per year and the timing of store openings has, and will continue to have, an impact on our results. We opened 33 stores during fiscal year 2025, and we plan to open approximately 30 to 35 new stores in fiscal 2026, primarily comprised of America's Best stores, after which time we expect to return to our more recent store opening cadence as strategic initiatives begin to take hold. We will continue to monitor and determine our plans for future new store openings based on health, safety and economic conditions.
Adjusted Comparable Store Sales Growth
We measure Adjusted Comparable Store Sales Growth as the increase or decrease in sales recorded by the comparable store base in any fiscal reporting period, compared to sales recorded by the comparable store base in the prior fiscal reporting period, which we calculate as follows: (i) sales are recorded at the point of sale (ii) sales are adjusted for managed care insurance collection estimates; (iii) stores are added to the calculation during the 13th full fiscal month following the store's opening; (iv) closed stores are removed from the calculation for time periods that are not comparable; (v) sales from partial months of operation are excluded when stores do not open or close on the first day of the month; and (vi) when applicable, we adjust for the effect of the 53rd week. Quarterly, year-to-date and annual adjusted comparable store sales are aggregated using only sales from all whole months of operation included in both the current reporting period and the prior reporting period. When a partial month is excluded from the calculation, the corresponding month in the subsequent period is also excluded from the calculation. There may be variations in the way in which some of our competitors and other retailers calculate comparable store sales. As a result, our adjusted comparable store sales may not be comparable to similar data made available by other retailers.
Adjusted Comparable Store Sales Growth is a non-GAAP financial measure, which we believe is useful because it provides timely and accurate information relating to the two core metrics of retail sales: number of transactions and value of transactions. We use Adjusted Comparable Store Sales Growth as the basis for key operating decisions, such as allocation of advertising to particular markets and implementation of special marketing programs. Accordingly, we believe that Adjusted Comparable Store Sales Growth provides timely and accurate information relating to the operational health and overall performance of each brand. We also believe that, for the same reasons, investors find our calculation of Adjusted Comparable Stores Sales Growth to be meaningful.
Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Diluted EPS (collectively, the "Company Non-GAAP Measures")
The Company Non-GAAP Measures are key measures used by management to assess our financial performance. The Company Non-GAAP Measures are also frequently used by analysts, investors and other interested parties. We use the Company Non-GAAP Measures to supplement U.S. GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. See "Non-GAAP Financial Measures" for definitions of the Company Non-GAAP Measures and for additional information.
Results of Operations
The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net revenue.
| In thousands, except earnings per share, percentage and store data | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||
| Revenue: | |||||||||||||||||
| Net product sales | $ | 1,604,592 | $ | 1,463,139 | $ | 1,423,229 | |||||||||||
| Net sales of services and plans | 382,896 | 360,181 | 333,142 | ||||||||||||||
| Total net revenue | 1,987,488 | 1,823,320 | 1,756,371 | ||||||||||||||
| Costs applicable to revenue (exclusive of depreciation and amortization): | |||||||||||||||||
| Products | 461,213 | 433,194 | 424,011 | ||||||||||||||
| Services and plans | 358,256 | 330,862 | 310,644 | ||||||||||||||
| Total costs applicable to revenue | 819,469 | 764,056 | 734,655 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling, general and administrative expenses | 1,016,251 | 938,524 | 904,757 | ||||||||||||||
| Depreciation and amortization | 91,152 | 91,349 | 89,874 | ||||||||||||||
| Asset impairment | 1,991 | 39,851 | 2,699 | ||||||||||||||
| Other expense (income), net | (204) | (101) | (104) | ||||||||||||||
| Total operating expenses | 1,109,190 | 1,069,623 | 997,226 | ||||||||||||||
| Income (loss) from operations | 58,829 | (10,359) | 24,490 | ||||||||||||||
| Interest expense, net | 17,148 | 16,184 | 14,339 | ||||||||||||||
| (Gain) loss on extinguishment of debt | - | (859) | 599 | ||||||||||||||
| Earnings (loss) from continuing operations before income taxes | 41,681 | (25,684) | 9,552 | ||||||||||||||
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Income tax provision
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12,081 | 1,481 | 6,006 | ||||||||||||||
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Income (loss) from continuing operations
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29,600 | (27,165) | 3,546 | ||||||||||||||
| Income (loss) from discontinued operations, net of tax (See Note 2) | - | (1,334) | (69,447) | ||||||||||||||
| Net income (loss) | $ | 29,600 | $ | (28,499) | $ | (65,901) | |||||||||||
| Supplemental operating data: | |||||||||||||||||
| Number of stores open at end of period | 1,250 | 1,240 | 1,188 | ||||||||||||||
| New stores opened during the period | 33 | 69 | 70 | ||||||||||||||
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Adjusted Operating Income from continuing operations(1)
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$ | 102,468 | $ | 65,489 | $ | 53,894 | |||||||||||
| Diluted earnings (loss) per share from continuing operations | $ | 0.37 | $ | (0.35) | $ | 0.05 | |||||||||||
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Adjusted Diluted EPS from continuing operations(1)
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$ | 0.80 | $ | 0.52 | $ | 0.47 | |||||||||||
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Adjusted EBITDA from continuing operations(1)
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$ | 192,943 | $ | 155,525 | $ | 142,237 | |||||||||||
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(1) Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA.
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| Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | |||||||||||||||
| Percentage of net revenue: | |||||||||||||||||
| Total costs applicable to revenue | 41.2 | % | 41.9 | % | 41.8 | % | |||||||||||
| Selling, general and administrative expenses | 51.1 | % | 51.5 | % | 51.5 | % | |||||||||||
| Total operating expenses | 55.8 | % | 58.7 | % | 56.8 | % | |||||||||||
| Income (loss) from continuing operations, net of tax | 1.5 | % | (1.5) | % | 0.2 | % | |||||||||||
| Adjusted Operating Income from continuing operations | 5.2 | % | 3.6 | % | 3.1 | % | |||||||||||
| Adjusted EBITDA from continuing operations | 9.7 | % | 8.5 | % | 8.1 | % | |||||||||||
Fiscal Year 2025 compared to Fiscal Year 2024
In 2024, certain components of our operations met the requirements to be classified as discontinued operations. Refer to Note 2 "Discontinued Operations" for information related to our discontinued operations. Unless otherwise noted, the discussion of U.S. GAAP results below is based on results from continuing operations, substantially all of which are attributable to our single reportable segment, Owned & Host. Fiscal 2025 consisted of 53 weeks compared to 52 weeks in fiscal 2024.
Net revenue
The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for fiscal year 2025 compared to fiscal year 2024.
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Comparable store sales growth(1)
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Stores open at end of period |
Net revenue(2)
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| In thousands, except percentage and store data | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2025 | Fiscal Year 2024 | ||||||||||||||||||||||||||||||||||||||
| Owned & Host segment | ||||||||||||||||||||||||||||||||||||||||||||
| America's Best | 6.3 | % | 1.8 | % | 1,057 | 1,036 | $ | 1,743,304 | 87.7 | % | $ | 1,561,062 | 85.6 | % | ||||||||||||||||||||||||||||||
| Eyeglass World | 4.2 | % | (2.2) | % | 122 | 122 | 202,404 | 10.2 | % | 200,107 | 11.0 | % | ||||||||||||||||||||||||||||||||
| Military | 2.6 | % | (0.5) | % | 53 | 53 | 23,555 | 1.2 | % | 22,596 | 1.2 | % | ||||||||||||||||||||||||||||||||
| Fred Meyer | 4.9 | % | (4.5) | % | 18 | 29 | 9,625 | 0.5 | % | 10,482 | 0.6 | % | ||||||||||||||||||||||||||||||||
| Owned & Host segment total | 1,250 | 1,240 | $ | 1,978,888 | 99.6 | % | $ | 1,794,247 | 98.4 | % | ||||||||||||||||||||||||||||||||||
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Corporate and other
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- | - | - | - | 20,972 | 1.0 | % | 27,621 | 1.5 | % | ||||||||||||||||||||||||||||||||||
| Effects of unearned and deferred revenue | - | - | - | - | (12,372) | (0.6) | % | 1,452 | 0.1 | % | ||||||||||||||||||||||||||||||||||
| Total | 5.9 | % | 1.9 | % | 1,250 | 1,240 | $ | 1,987,488 | 100.0 | % | $ | 1,823,320 | 100.0 | % | ||||||||||||||||||||||||||||||
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Effect of deferred and unearned revenue on comparable store sales
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0.1 | % | (0.6) | % | ||||||||||||||||||||||||||||||||||||||||
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Adjusted Comparable Store Sales Growth from continuing operations
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6.0 | % | 1.3 | % | ||||||||||||||||||||||||||||||||||||||||
(1)We calculate total comparable store sales from continuing operations based on consolidated net revenue from continuing operations excluding the impact of (i) Corporate and other revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year. Brand-level comparable store sales growth is calculated based on point-of-sale revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 15. "Segment Reporting" in our consolidated financial statements.
(2)Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
Total net revenue of $1,987.5 million for fiscal year 2025 increased $164.2 million, or 9.0%, from $1,823.3 million for fiscal year 2024. The increase was primarily driven by Adjusted Comparable Store Sales Growth and new store sales, partially offset by closed stores and the timing of unearned revenue. Unearned and deferred revenue negatively impacted net revenue by $13.8 million during fiscal year 2025 compared to fiscal year 2024, primarily driven by the timing of unearned revenue recognition. The 53rd week in fiscal 2025 added $35.6 million to net revenue and approximately $0.03 to diluted EPS for the year.
Comparable store sales growth and Adjusted Comparable Store Sales Growth from continuing operations for fiscal year 2025 were 5.9% and 6.0%, respectively, both primarily driven by higher average ticket and continued strength in the Company's managed care cohort, partially offset by a slight decrease in customer traffic.
During fiscal year 2025, we opened 33 new America's Best stores and closed 12 America's Best stores and 11 Fred Meyer stores. Two of the Fred Meyer stores closed as a result of the host partner's decision to cease its overall operations at these locations. Overall, store count grew 0.8% from the end of fiscal year 2024 to the end of fiscal year 2025.
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Fiscal Year Ended
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(in thousands)
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January 3, 2026 | December 28, 2024 |
$ Change
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% Change
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Total net revenue
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$ | 1,987,488 | $ | 1,823,320 | $ | 164,168 | 9.0 | % | ||||||
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Net product sales
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$ | 1,604,592 | $ | 1,463,139 | $ | 141,453 | 9.7 | % | ||||||
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As a percentage of total net revenue
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80.7 | % | 80.2 | % | ||||||||||
|
Net sales of services and plans
|
$ | 382,896 | $ | 360,181 | $ | 22,715 | 6.3 | % | ||||||
|
As a percentage of total net revenue
|
19.3 | % | 19.8 | % | ||||||||||
Net product sales increased $141.5 million, or 9.7% during fiscal year 2025 compared to fiscal year 2024, primarily due to pricing and product mix initiatives in eyeglass sales of $123.4 million, or 10.8%,contact lens sales of $16.9 million, or 5.5%, and other add-on sales.
Net sales of services and plans increased $22.7 million, or 6.3%, driven primarily by higher exam revenues of $21.1 million, or 9.0%.
Costs applicable to revenue
|
Fiscal Year Ended
|
||||||||||||||
|
(in thousands)
|
January 3, 2026 | December 28, 2024 |
$ Change
|
% Change
|
||||||||||
|
Total costs applicable to revenue
|
$ | 819,469 | $ | 764,056 | $ | 55,413 | 7.3 | % | ||||||
|
As a percentage of total net revenue
|
41.2 | % | 41.9 | % | ||||||||||
|
Total costs of products
|
$ | 461,213 | $ | 433,194 | $ | 28,019 | 6.5 | % | ||||||
|
As a percentage of net product sales
|
28.7 | % | 29.6 | % | ||||||||||
|
Total costs of services and plans
|
$ | 358,256 | $ | 330,862 | $ | 27,394 | 8.3 | % | ||||||
|
As a percentage of net sales of services and plans
|
93.6 | % | 91.9 | % | ||||||||||
Costs applicable to revenue of $819.5 million for fiscal year 2025 increased $55.4 million, or 7.3%, from $764.1 million for fiscal year 2024. As a percentage of net revenue, costs applicable to revenue decreased 70 basis points primarily driven by eyeglass mix and margin improvement of 140 basis points related to a successful execution of pricing and product mix initiatives and leveraging of optometrist-related costs of 10 basis points, partially offset by lower contact lens margin of 20 basis points and other mix and margin effects of 60 basis points.
Costs of products as a percentage of net product sales decreased 90 basis points primarily driven by eyeglass mix and margin improvement related to a successful execution of pricing and product mix initiatives, partially offset by lower contact lens margin.
Costs of services and plans as a percentage of net sales of services and plans increased 170 basis points primarily driven by lower growth in add-ons and eye exam revenues relative to the growth in optometrist-related costs.
Selling, general and administrative
|
Fiscal Year Ended
|
||||||||||||||
|
(in thousands)
|
January 3, 2026 | December 28, 2024 |
$ Change
|
% Change
|
||||||||||
|
SG&A
|
$ | 1,016,251 | $ | 938,524 | $ | 77,727 | 8.3 | % | ||||||
| As a percentage of total revenue | 51.1 | % | 51.5 | % | ||||||||||
SG&A of $1,016.3 million for fiscal year 2025 increased $77.7 million, or 8.3%, from fiscal year 2024. SG&A as a percentage of net revenue decreased 40 basis points and was primarily impacted by improved leverage of advertising investments and other expenses of 170 basis points, which included an offset from higher healthcare expenses. These were partially offset by increases in variable incentive compensation expenses of 100 basis points and an increase in stock-based compensation of 30 basis points primarily related to revenue and profitability growth.
Depreciation and amortization
Depreciation and amortization expense of $91.2 million for fiscal year 2025 decreased $0.2 million, or 0.2%, from $91.3 million for fiscal year 2024 primarily driven by fewer new store openings, partially offset by higher depreciation related to investments in existing stores.
Asset impairment
We recognized $2.0 million of impairment charges during fiscal year 2025 primarily for tangible long-lived assets and right of use ("ROU") assets associated with our retail stores. We recognized $39.9 million of impairment charges in fiscal year 2024, primarily for the Eyeglass World goodwill and Fred Meyer contracts and relationships intangible asset, and tangible long-lived assets and ROU assets associated with our retail stores. Asset impairment expenses were recognized in Corporate and other. Refer to Note 12 "Fair Value Measurement" and Note 4 "Goodwill and Intangible Assets" for further details.
Interest expense, net
Interest expense, net, of $17.1 million for fiscal year 2025 increased $1.0 million, or 6.0%, from $16.2 million for fiscal year 2024. The change was primarily a result of lower income on cash balances of $3.8 million, partially offset by lower interest expense on our debt of $2.7 million.
Income tax provision
Our effective tax ratesfor fiscal year 2025 and fiscal year 2024 were 29.0% and (5.8)%, respectively. The change in effective tax rates reflectsour statutory federal and state rateof 25.1% and 25.2%, respectively, the tax impacts of the partial disallowance of Eyeglass World goodwill impairment loss for income tax purposes and other effects of permanent items. Refer to Note 7 "Income Taxes" for further details.
Discontinued Operations
Loss from discontinued operations, net of tax, of $1.3 million for fiscal year 2024 represents loss prior to the termination of our partnership with Walmart and the wind-down of the AC Lens operations. There were no discontinued operations results for fiscal year 2025.
Fiscal Year 2024 compared to Fiscal Year 2023
For a comparison of our results of operations for the years ended December 28, 2024 to December 30, 2023, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 26, 2025.
Non-GAAP Financial Measures
Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS
We define Adjusted Operating Income as net income (loss), plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, ERP and CRM implementation expenses, shareholder activism costs, severance and associate-related costs associated with organizational restructuring and certain other expenses. We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue.
We define EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization.
We define Adjusted EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, ERP and CRM implementation expenses, shareholder activism costs, severance and associate-related costs associated with organizational restructuring and certain other expenses.
We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue.
We define Adjusted Diluted EPS as diluted earnings (loss) per share, adjusted for the per share impact of stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs related to our 2025 Notes when not required under U.S. GAAP to be added back for diluted earnings (loss) per share, derivative fair value adjustments, ERP and CRM implementation expenses,shareholder activism costs, severance and associate-related costs associated with organizational restructuring,and certain other expenses, less the tax effect of these adjustments including tax expense (benefit) from stock-based compensation.
When presenting Adjusted Operating Income from continuing operations, EBITDA from continuing operations and Adjusted EBITDA from continuing operations we use the same definitions for Adjusted Operating Income, EBITDA and Adjusted EBITDA, respectively, and also exclude income (loss) from discontinued operations, net of tax. When presenting Adjusted Diluted EPS from continuing operations, we use the same definition for Adjusted Diluted EPS, and also exclude diluted earnings (loss) per share from discontinued operations. When presenting Adjusted Operating Margin from continuing operations, we use Adjusted Operating Income from continuing operations as a percentage of total net revenue. When presenting Adjusted EBITDA Margin from continuing operations, we use Adjusted EBITDA from continuing operations as a percentage of total net revenue.
EBITDA and the Company Non-GAAP Measures can vary substantially in size from one period to the next, and certain types of expenses are non-recurring in nature and consequently may not have been incurred in any of the periods presented below.
EBITDA and the Company Non-GAAP Measures have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with U.S. GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes EBITDA, and the Company Non-GAAP Measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We also use EBITDA and the Company Non-GAAP Measures to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements U.S. GAAP results with Non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than U.S. GAAP results alone. We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.
EBITDA and the Company Non-GAAP Measures are not recognized terms under U.S. GAAP and should not be considered as an alternative to net income or income from operations as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with U.S. GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management's discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In evaluating EBITDA and the Company Non-GAAP Measures, we may incur expenses in the future that are the same as or similar to some of the adjustments in this presentation. Our presentation of EBITDA and the Company Non-GAAP Measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on our U.S. GAAP results in addition to using EBITDA and the Company Non-GAAP Measures.
The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
•they do not reflect costs or cash outlays for capital expenditures or contractual commitments;
•they do not reflect changes in, or cash requirements for, our working capital needs;
•EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect the interest expense (income), net or the cash requirements necessary to service interest or principal payments, on our debt;
•EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect period to period changes in taxes, income tax provision or the cash necessary to pay income taxes;
•they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
•other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
Because of these limitations, EBITDA and the Company Non-GAAP Measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness.
The following table reconciles our Adjusted Operating Income from continuing operations, Adjusted Operating Margin from continuing operations, EBITDA from continuing operations, Adjusted EBITDA from continuing operations, Adjusted EBITDA Margin from continuing operations to Net income margin from continuing operations; and Adjusted Diluted EPS from continuing operations to Diluted EPS from continuing operations for the periods presented:
| In thousands | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 29,600 | 1.5 | % | $ | (28,499) | (1.6) | % | $ | (65,901) | (3.8) | % | |||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | - | - | % | (1,334) | (1.0) | % | (69,447) | (18.8) | % | ||||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | 29,600 | 1.5 | % | (27,165) | (1.5) | % | 3,546 | 0.2 | % | ||||||||||||||||||||||||||
| Interest expense, net | 17,148 | 0.9 | % | 16,184 | 0.9 | % | 14,339 | 0.8 | % | ||||||||||||||||||||||||||
| Income tax provision | 12,081 | 0.6 | % | 1,481 | 0.1 | % | 6,006 | 0.3 | % | ||||||||||||||||||||||||||
|
Stock-based compensation expense (a)
|
23,686 | 1.2 | % | 16,708 | 0.9 | % | 19,203 | 1.1 | % | ||||||||||||||||||||||||||
|
(Gain) loss on extinguishment of debt (b)
|
- | - | % | (859) | - | % | 599 | - | % | ||||||||||||||||||||||||||
|
Asset impairment(c)
|
1,991 | 0.1 | % | 39,851 | 2.2 | % | 2,699 | 0.2 | % | ||||||||||||||||||||||||||
|
Litigation settlement(d)
|
1,903 | 0.1 | % | 4,450 | 0.2 | % | - | - | % | ||||||||||||||||||||||||||
|
Amortization of acquisition intangibles(e)
|
677 | - | % | 1,313 | 0.1 | % | 1,525 | 0.1 | % | ||||||||||||||||||||||||||
|
ERP and CRM implementation expenses (h)
|
6,420 | 0.3 | % | 5,990 | 0.3 | % | 484 | - | % | ||||||||||||||||||||||||||
|
Other(i)
|
8,962 | 0.5 | % | 7,536 | 0.4 | % | 5,493 | 0.3 | % | ||||||||||||||||||||||||||
| Adjusted Operating Income from continuing operations / Adjusted Operating Margin from continuing operations | $ | 102,468 | 5.2 | % | $ | 65,489 | 3.6 | % | $ | 53,894 | 3.1 | % | |||||||||||||||||||||||
|
Note: Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
|
|||||||||||||||||||||||||||||||||||
| In thousands | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 29,600 | 1.5 | % | $ | (28,499) | (1.6) | % | $ | (65,901) | (3.8) | % | |||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | - | - | % | (1,334) | (1.0) | % | (69,447) | (18.8) | % | ||||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | 29,600 | 1.5 | % | (27,165) | (1.5) | % | 3,546 | 0.2 | % | ||||||||||||||||||||||||||
| Interest expense, net | 17,148 | 0.9 | % | 16,184 | 0.9 | % | 14,339 | 0.8 | % | ||||||||||||||||||||||||||
| Income tax provision | 12,081 | 0.6 | % | 1,481 | 0.1 | % | 6,006 | 0.3 | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 91,152 | 4.6 | % | 91,349 | 5.0 | % | 89,874 | 5.1 | % | ||||||||||||||||||||||||||
| EBITDA from continuing operations | 149,981 | 7.5 | % | 81,849 | 4.5 | % | 113,765 | 6.5 | % | ||||||||||||||||||||||||||
|
Stock-based compensation expense (a)
|
23,686 | 1.2 | % | 16,708 | 0.9 | % | 19,203 | 1.1 | % | ||||||||||||||||||||||||||
|
(Gain) loss of extinguishment of debt (b)
|
- | - | % | (859) | - | % | 599 | - | % | ||||||||||||||||||||||||||
|
Asset impairment (c)
|
1,991 | 0.1 | % | 39,851 | 2.2 | % | 2,699 | 0.2 | % | ||||||||||||||||||||||||||
|
Litigation settlement (d)
|
1,903 | 0.1 | % | 4,450 | 0.2 | % | - | - | % | ||||||||||||||||||||||||||
|
ERP and CRM implementation expenses(h)
|
6,420 | 0.3 | % | 5,990 | 0.3 | % | 484 | - | % | ||||||||||||||||||||||||||
|
Other (i)
|
8,962 | 0.5 | % | 7,536 | 0.4 | % | 5,487 | 0.3 | % | ||||||||||||||||||||||||||
| Adjusted EBITDA from continuing operations / Adjusted EBITDA Margin from continuing operations | $ | 192,943 | 9.7 | % | $ | 155,525 | 8.5 | % | $ | 142,237 | 8.1 | % | |||||||||||||||||||||||
|
Note: Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
|
|||||||||||||||||||||||||||||||||||
| In thousands, except per share amounts | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||
| Diluted EPS | $ | 0.37 | $ | (0.36) | $ | (0.84) | |||||||||||
| Diluted EPS from discontinued operations | - | (0.02) | (0.88) | ||||||||||||||
| Diluted EPS from continuing operations | 0.37 | (0.35) | 0.05 | ||||||||||||||
|
Stock-based compensation expense (a)
|
0.29 | 0.21 | 0.24 | ||||||||||||||
|
(Gain) loss on extinguishment of debt (b)
|
- | (0.01) | 0.01 | ||||||||||||||
|
Asset impairment (c)
|
0.02 | 0.51 | 0.03 | ||||||||||||||
|
Litigation settlement (d)
|
0.02 | 0.06 | - | ||||||||||||||
|
Amortization of acquisition intangibles (e)
|
0.01 | 0.02 | 0.02 | ||||||||||||||
|
Amortization of debt discounts and deferred financing costs (f)
|
0.02 | 0.03 | 0.04 | ||||||||||||||
|
Derivative fair value adjustments(g)
|
- | 0.08 | 0.12 | ||||||||||||||
|
ERP and CRM implementation expenses (h)
|
0.08 | 0.08 | 0.01 | ||||||||||||||
|
Other (i)
|
0.12 | 0.10 | 0.07 | ||||||||||||||
|
Tax effects (j)
|
(0.13) | (0.19) | (0.12) | ||||||||||||||
| Adjusted Diluted EPS from continuing operations | $ | 0.80 | $ | 0.52 | $ | 0.47 | |||||||||||
| Weighted average diluted shares outstanding | 80,576 | 78,592 | 78,596 | ||||||||||||||
|
Note: Some of the totals in the table above do not foot due to rounding differences.
|
|||||||||||||||||
____________
(a)Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and performance vesting conditions.
(b)Reflects the extinguishment (gain) loss related to the repurchase of the 2025 Notes of $100.0 million and $217.7 million during fiscal years 2023 and 2024, respectively.
(c)Reflects write-off related to non-cash impairment charges, primarily impairment of Eyeglass World goodwill, impairment of Fred Meyer contracts and relationship asset, and impairment of property, equipment and lease-related assets on closed or underperforming stores and certain store closure decisions made as part of the Company's store optimization review.
(d)Expenses associated with settlement of certain litigation.
(e)Amortization of the increase in carrying values of finite-lived intangible assets resulting from the purchase accounting following the acquisition of the Company by affiliates of KKR & Co. Inc.
(f)Amortization of deferred financing costs and other non-cash charges related to our debt. We adjust for amortization of deferred financing costs related to the 2025 Notes only when adjustment for these costs is not required in the calculation of diluted earnings per share under U.S. GAAP.
(g)The adjustments for the derivative fair value (gains) and losses have the effect of adjusting the (gain) or loss for changes in the fair value of derivative instruments and amortization of AOCL for derivatives not designated as accounting hedges. This results in reflecting derivative (gains) and losses within Adjusted Diluted EPS during the period the derivative is settled.
(h)Costs related to the Company's ERP and CRM implementation.
(i)Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to costs associated with the digitization of paper-based records of $2.2 million, $5.8 million and $2.2 million for fiscal years 2025, 2024 and 2023, respectively, severance and associate-related costs related to organizational restructuring of $3.6 million and shareholder activism of $2.1 million for fiscal year 2025, and other expenses and adjustments.
(j)Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates, excluding a portion of Eyeglass World goodwill impairment charge, which was disallowed for income tax purposes in fiscal year 2024, and including tax expense (benefit) from stock-based compensation.
Liquidity and Capital Resources
Our primary cash needs are for inventory, payroll, store rent, advertising, capital expenditures associated with new stores and updating existing stores, as well as information and remote medicine technology and infrastructure, including our corporate office, distribution centers and laboratories. When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock or other securities, based on excess cash flows. The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued expenses. We exercise prudence in our use of cash and closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and alternative sources of funding. We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing. We believe that cash on hand, cash expected to be generated from operations and the availability of borrowings under our revolving credit facility will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures and payments due under our existing debt for the next 12 months and
thereafter for the foreseeable future. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our Term Loan A where possible.
In August 2024, we incurred an incremental term loan in the amount of $115.0 million and used the proceeds in addition to cash on hand to repurchase $217.7 million aggregate principal amount of the 2025 Notes. In May 2025, we fully repaid the remaining $84.8 million principal balance of the 2025 Notes using a combination of cash on hand and borrowings from our Revolving Loans. Later, in 2025, we fully repaid our balance outstanding under our Revolving Loans. Refer to Note 5. "Debt" for more information. Our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. We primarily fund our working capital needs using cash provided by operations. Our working capital requirements for inventory will increase as we continue to open additional stores.
During the fourth quarter of 2025, we entered into an interest rate swap with a notional amount of $100.0 million to mitigate the variability of cash flows associated with these interest payments. See Note 13. "Interest Rate Derivatives" for additional information.
As of fiscal year end 2025, we had $38.7 million in cash and cash equivalents and $293.3 million of availability under our revolving credit facility, net of $6.7 million in outstanding letters of credit.
The following table summarizes cash flows provided by (used for) operating activities, investing activities and financing activities for the periods indicated:
| In thousands | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||
| Cash flows provided by (used for): | |||||||||||||||||
| Operating activities | $ | 146,293 | $ | 133,649 | $ | 173,033 | |||||||||||
| Investing activities | (76,606) | (96,094) | (115,822) | ||||||||||||||
| Financing activities | (104,622) | (113,345) | (136,808) | ||||||||||||||
|
Net change in cash, cash equivalents and restricted cash
|
$ | (34,935) | $ | (75,790) | $ | (79,597) | |||||||||||
Net Cash Provided by Operating Activities
Cash flows provided by operating activities increased by $12.6 million to $146.3 million, during fiscal year 2025 from $133.6 million during fiscal year 2024 as a result of an increase in net income of $58.1 million. This was partially offset by changes in net working capital and other assets and liabilities of $30.8 million and a decrease in non-cash adjustments items of $14.7 million primarily driven by a decrease in asset impairment, partially offset by increases in deferred income taxes and stock-based compensation.
Working capital was primarily impacted by changes in trade receivables, other assets, inventory, accounts payable, other liabilities, and timing of unearned and deferred revenue. Changes in trade receivables used $44.5 million more in cash and were primarily driven by changes in sales. Changes in other assets used $38.4 million more in cash, primarily due to increased cloud-based software assets. Changes in inventories used $22.3 million more in cash due to product mix initiatives. These were partially offset by changes in accounts payable, which contributed $39.3 million more in cash. Changes in other liabilities contributed $16.0 million more in cash primarily due to increases in compensation-related and other accruals. The timing of unearned and deferred revenue contributed $18.6 million more in cash. Year-over-year changes in working capital were also impacted by the AC Lens wind down and the termination of the Walmart partnership in 2024 that did not recur in 2025.
Net Cash Used for Investing Activities
Net cash used for investing activities decreased by $19.5 million, to $76.6 million, during fiscal year 2025 from $96.1 million during fiscal year 2024. The decrease was primarily due to lower store openings, partially offset by higher investments in doctor and other in-store equipment in existing stores.
Net Cash Provided by (Used for) Financing Activities
Net cash used for financing activities decreased $8.7 million, from $113.3 million use of cash during fiscal year 2024 to $104.6 million use of cash during fiscal year 2025. The $8.7 million decrease was primarily due to borrowings on the Revolving Loans of $25.0 million offset by a repayment of $84.8 million of the 2025 Notes and $25.0 million of Revolving Loans in fiscal year 2025 as compared to a prepayment of $217.7 million aggregate principal amount of the 2025 Notes for an aggregate cash repurchase price of $215.0 million, which was partially offset by additional term loan borrowings of $115.0 million in fiscal year 2024.
Debt
The following table sets forth the amounts owed under our term loan and the interest rate on such outstanding amount, and the amount available for additional borrowing thereunder, as of the end of fiscal year 2025:
| In thousands |
Interest Rate (2)
|
Amount Outstanding | Amount Available for Additional Borrowing | |||||||||||||||||
| Term Loan A, due June 13, 2028 | Variable | $ | 237,625 | $ | - | |||||||||||||||
|
Revolving Loans, due June 13, 2028(1)
|
Variable | - | 293,300 | |||||||||||||||||
| Total | $ | 237,625 | $ | 293,300 | ||||||||||||||||
____________
(1)At January 3, 2026, the amount available under our revolving credit facility reflected a reduction of $6.7 million of letters of credit outstanding.
(2)Refer to Note 5. Debt for the interest rates used on the term loan and revolving credit facility.
Share Repurchase Authority
On February 23, 2022, our Board of Directors authorized a $100 million increase to the share repurchase authorization, resulting in total authorization of $200 million. During fiscal year 2023, the Company repurchased 1.1 million shares of its common stock for $25 million under the share repurchase program. The Company's original share repurchase authorization expired on December 30, 2023, and had remaining capacity of $25 million. Effective February 23, 2024, the Board authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company's common stock until January 3, 2026. No additional shares were repurchased in fiscal years 2024 and 2025. The share repurchase authorization expired on January 3, 2026, and had remaining capacity of $50 million. Effective March 2, 2026, the Board authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company's common stock until December 28, 2030. The authorization permits the Company to make purchases of its common stock from time to time in the open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting the requirements of all applicable securities laws and regulations. The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company's shares, general market and economic conditions, legal requirements and tax implications. The Company expects to fund the share repurchases using cash on hand.
Capital Expenditures
| In thousands | Fiscal Year 2025 | Fiscal Year 2024 | Fiscal Year 2023 | ||||||||||||||
| New stores (owned brands) | $ | 16,798 | $ | 44,347 | $ | 51,938 | |||||||||||
| Laboratories, distribution centers and optometric equipment | 21,935 | 7,981 | 26,030 | ||||||||||||||
| Information technology and other | 34,107 | 43,177 | 36,806 | ||||||||||||||
| Total | $ | 72,840 | $ | 95,505 | $ | 114,774 | |||||||||||
We expect capital expenditures in fiscal year 2026 to be approximately between $73 million and $78 million and to be used primarily in supporting the Company's growth through investments in new and existing stores, and IT infrastructure. We expect to fund capital expenditures with cash flows from operations, but may also use existing cash balances or funds available through our revolving credit facility.
Material Cash Requirements
As of fiscal year end 2025, our current and long-term material cash requirements include the following commitments and contractual obligations:
| In thousands | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||
|
Term loan(a)
|
$ | 13,250 | $ | 13,250 | $ | 211,125 | $ | - | $ | - | $ | - | $ | 237,625 | ||||||||||||||||||||||||||||||
|
Revolving credit facility(b)
|
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
|
Estimated interest(c)
|
12,266 | 10,976 | 4,816 | - | - | - | 28,058 | |||||||||||||||||||||||||||||||||||||
|
Noncancelable operating leases(d)
|
110,992 | 102,659 | 80,021 | 70,742 | 53,573 | 111,690 | 529,677 | |||||||||||||||||||||||||||||||||||||
|
Finance leases(e)
|
4,249 | 3,370 | 1,959 | 612 | 273 | 136 | 10,599 | |||||||||||||||||||||||||||||||||||||
|
Other commitments(f)
|
79,975 | 43,561 | 27,631 | 18,092 | 4,244 | 749 | 174,252 | |||||||||||||||||||||||||||||||||||||
| Total | $ | 220,732 | $ | 173,816 | $ | 325,552 | $ | 89,446 | $ | 58,090 | $ | 112,575 | $ | 980,211 | ||||||||||||||||||||||||||||||
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(a)Refer to Note 5. "Debt" to our consolidated financial statements for more information on our term loan.
(b)Refer to Note 5. "Debt" for more information on our revolving credit facility.
(c)We have estimated our interest payments on our term loan based on Term Secured Overnight Financing Rate as of the end of fiscal year 2025. Amounts and timing may be different from our estimated interest payments due to potential voluntary prepayments, borrowings and interest rate fluctuations. Cash flows related to our hedging instruments are excluded from estimated interest presented in the table above.
(d)We lease our retail stores, optometric examination offices, distribution centers, office space and all of our optical laboratories with the exception of our St. Cloud, Minnesota lab, which we own. The vast majority of our leases are classified as operating leases under current accounting guidance. Although rent expense on operating leases is recorded in SG&A on a straight-line basis over the term of the lease, contractual obligations above represent required cash payments. Our lease arrangements require us to pay executory costs such as insurance, real estate taxes and common area maintenance and some of our leases are based on a percentage of sales. These expenses are generally variable, not included above, and were approximately $40.1 million during fiscal year ended 2025. Refer to Note 10. "Leases" for our current and long-term lease payment obligations.
(e)For leases classified as finance leases, the finance lease asset is recorded as property and equipment and a corresponding amount is recorded as a long-term debt obligation in the Consolidated Balance Sheets at the net present value of the minimum lease payments to be made over the lease term for new finance leases. We allocate each lease payment between a reduction of the lease obligation and interest expense using the effective interest method. Finance lease amounts above represent required contractual cash payments in the periods presented. Refer to Note 10. "Leases" for our current and long-term lease payment obligations.
(f)Other commitments include minimum purchase commitments with certain trade vendors and contractual agreements to purchase goods or services in the ordinary course of business.
In addition to lease commitments and contractual obligations, our material cash requirements also include operating expenses such as payroll, store rent, and advertising expenses, which we expect to fund primarily with existing cash balances and cash flows from operations.
We follow U.S. GAAP in making the determination as to whether to record an asset or liability related to our arrangements with third parties. Consistent with current accounting guidance, we do not record an asset or liability associated with long-term purchase, marketing and promotional commitments, or commitments to philanthropic endeavors. We have disclosed the amount of future commitments associated with these items in our consolidated financial statements. We are not a party to any other off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates the accounting policies, estimates and judgments on an ongoing basis. We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.
We have evaluated the accounting policies used in the preparation of the Company's consolidated financial statements and related notes and believe those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. More information on all of our significant accounting policies can be found in Note 1. "Business and Significant Accounting Policies," to our consolidated financial statements, as well as in certain other notes to the consolidated financial statements as indicated below.
Revenue Recognition
At our America's Best brand, our signature offer is an eye exam plus two pairs of eyeglasses for one great price. Since an eye exam is a key component in the ability for acceptable prescription eyewear to be delivered to a customer, we concluded that the eye exam service, while capable of being distinct from the eyeglass product delivery, was not distinct in the context of the two-pair offer. As a result, we do not allocate revenue to the eye exam associated with the two-pair offer, and we record all revenue associated with the offer in net product sales when the customer has received and accepted the merchandise.
We recognize revenue across our product protection plan and club membership contract portfolio based on the value delivered to the customers relative to the remaining services promised under the programs. We determine the value delivered based on the expected timing and amount of customer usage of benefits over the terms of the contracts. A 100 basis point change in our estimate of value delivered to customers compared to expected customer usage of benefits would have affected revenues in fiscal year 2025 by approximately $1.5 million; this amount would have been recognized at different times over the contract period.
Unearned revenue at the end of a reporting period is estimated based on processing and delivery times throughout the current month and is generally within two weeks. All unearned revenue at the end of a reporting period is recognized in the next fiscal period. A one-day increase in our estimate of the average days needed to process delivery would have affected revenues in fiscal year 2025 by approximately $5 million, which would ultimately have been recorded in the next fiscal year.
The Company considers its revenue from managed care customers to include variable consideration and estimates such amounts associated with managed care customer revenues using the history of concessions provided and cash receipts from managed care providers; a 100 basis point change in our rate of concessions granted would have reduced our revenues in fiscal year 2025 by approximately $2 million.
See Note 8. "Revenue from Contracts with Customers" in our audited consolidated financial statements for additional information.
Impairment of P&E and ROU assets
In evaluating store-level property and equipment and ROU assets for recoverability and impairment, we may consider multiple factors including financial performance of the stores, regional and local business climates, future plans for the store operations and other qualitative factors. We estimate the fair value of the asset group using an income approach based on discounted cash flows, which requires estimates and assumptions of forecasted store revenue growth rates and store profitability. We consider market-based indications of prevailing rental rates, lease incentives and discount rates for retail space when estimating the fair value of ROU assets. Developing the estimates and assumptions used in our recovery and impairment evaluations require judgment.
We had $344.6 million of property and equipment, net, and ROU assets of $394.9 million as of January 3, 2026. Changes in estimates and assumptions used in our impairment testing of property and equipment could result in future impairment losses, which could be material. We recognized impairments of property and equipment and ROU assets of $2.0 million, $10.1 million and $2.7 million in fiscal years 2025, 2024 and 2023, respectively. Refer to Note 12. "FairValue Measurement" for further information on impairments recognized in fiscal year 2025.
Impairment of Goodwill and Intangible Assets
We calculate the fair value of our reporting units using a combination of income and market approaches. The income approach uses estimated after-tax cash flows discounted using a weighted average cost of capital. The cash flows used in the analysis are based on financial forecasts developed internally by management and require judgment. Significant unobservable inputs used in the fair value measurement of the reporting units include, but are not limited to, revenue growth rates, costs applicable to revenue, SG&A and discount rates. These assumptions are sensitive to future changes in the business profitability, changes in our business strategy, customer concentration risk and external market conditions, among other factors. The market approach estimates fair value using market-based multiples for comparable companies and requires significant management judgment. Changes to the comparable company set or selected market-based inputs can materially affect the estimated fair value of our reporting units.
See Note 4. "Goodwill and Intangible Assets" for further detail on goodwill impairment. As of January 3, 2026, we had $700.6 million of goodwill, $240.5 million of non-amortizing intangible assets, and $7.6 million of other intangible assets, net of accumulated amortization. Changes in estimates and assumptions used in our impairment testing could result in future impairment losses, which could be material.
Our America's Best reporting unit was not at risk of failing the annual goodwill impairment test in fiscal year 2025. A hypothetical 100 basis point increase in the discount rate used to estimate the fair value of the America's Best reporting unit would not result in goodwill impairment in fiscal year 2025. Our Eyeglass World reporting unit was not at risk of failing the annual goodwill impairment test in fiscal year 2025. A hypothetical 100 basis point increase in the discount rate used to estimate the fair value of the Company's Eyeglass World reporting unit would not result in goodwill impairment in fiscal year 2025. Future changes in a reporting unit's business profitability, expected cash flows, changes in business strategy and external market conditions, among other factors, could require us to record an impairment charge for goodwill.
When evaluating indefinite-lived, non-amortizing trademarks and trade names for impairment, we use the relief-from-royalty method to estimate fair value, whereby an estimated royalty rate is determined based on comparable licensing arrangements, which is then applied to the revenue projections for the subject asset. The estimated fair value is calculated using a discounted cash flow analysis. We record an impairment charge as the excess of carrying value over estimated fair value. A hypothetical 100 basis point increase in discount rates used to estimate the fair value of the Company's trademarks and trade names would not result in an impairment of the America's Best or Eyeglass World assets. A 10 basis point decrease in the royalty rates used in the analyses would not result in an impairment of America's Best or Eyeglass World's assets.
If impairment indicators related to finite-lived, amortizing intangible assets are present, we estimate cash flows expected to be generated over the remaining useful lives of the related assets based on current projections. If the projected net undiscounted cash flows are less than the carrying value of the related assets, we then measure impairment based on a discounted cash flow model and record an impairment charge as the excess of carrying value over the estimated fair value.
Refer to Note 1. "Business and Significant Accounting Policies", Note 4. "Goodwill and Intangible Assets", and Note 12. "Fair Value Measurement" for further detail on impairment of goodwill and intangible assets.
Income Taxes
Income tax accounting involves the use of estimates and complex judgments in a number of areas including the recognition of deferred tax assets and liabilities and the evaluation of uncertain tax positions. Our net deferred liability balance as of January 3, 2026 was $82.6 million. As future events, including tax law changes, are unpredictable, we continue to monitor developments in the tax landscape and adjust our assumptions and estimates accordingly. Changes in our assumptions and estimates could result in material changes to these balances. See Note 7. "Income Taxes" to our consolidated financial statements.
Inventories
Inventory shrinkage is estimated and recorded throughout the period in cost of sales based on historical results and current inventory levels. Inventory values are adjusted for estimated obsolescence and written down to net realizable value ("NRV") based on estimates of current and anticipated demand, customer preference, and merchandise age. Actual shrinkage is recorded throughout the year based upon periodic physical counts. As of January 3, 2026, our total inventory balance was $89.3 million. A 10% increase in the obsolescence and shrinkage reserves will not have a material impact on our financial position. See Note 1. "Business and Significant Accounting Policies" to our consolidated financial statements.
Recently Issued Accounting Pronouncements
For information on recently issued accounting pronouncements, see Note 1. "Business and Significant Accounting Policies" to our consolidated financial statements.
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