Readers will recall that the prescription eyewear industry had a difficult 2022 and first half of 2023 after producing big gains in 2021 due to stimulus dollars. Additionally, a large number of optometrists left following the 2021 surge, resulting in fewer eye exams. Fewer exams led to fewer fittings and downward pressure on visits and transactions. However, large investments in improved working conditions and hours, remote exams, and higher pay has resulted in a recovery in exams, which resulted in a firming of demand and market growth during 2023. One can see this in the table below, with Q2 2021 real consumer expenditures running 18% above pre-pandemic levels, then declining to 13% in 2022, and year-over-year normalization in 2023. The better prescription retail backdrop has also allowed Warby Parker to improve its profitability and generate cash this year: +$4M year-to-date versus a decline of -$30M over the same period in 2022.
For Q3 2023, EssilorLuxottica reported again that Sunglass Hut had a difficult period in the U.S. region, but revenue for its prescription business Lenscrafters grew by low-single-digits; Target Optical and Peale Vision revenue grew mid-single-digits. Management was also constructive on the prescription eyewear wholesale business to independent and smaller optometrists/ophthalmologist networks. Interestingly, National Vision also reported a solid +4.3% comp-sales gain and as the table above suggests, the trend versus 2019 also improved. The efficacy of the greater exams and optometrist recruitment can be seen in the traffic and comparable-store sales between National Vision's two chains, America's Best and Eyeglass World. Management had first focused on larger America’s Best business (900 locations versus 150 locations), and that is where the gains in traffic and comps has been. By contrast, Eyeglass World is still experiencing declines in traffic and comps.
National Vision is applying the same playbook to Eyeglass World. National Vision CEO Reade Fahs said, “We have continued to see improvement with stores that do not have optimal coverage, which we refer to as dark and dim locations to expanding exam capacity from our recruiting, retention and remote initiatives. We are pleased to continue to see much lower levels of dark stores compared to the peak we saw last year and are seeing slower but steady progress addressing our dim storage as well. As a reminder, we define dark stores as locations that do not have doctor coverage and dim stores at those locations that have less than three days of doctor coverage. We remain focused on executing our initiatives to continue to drive improvement across our fleet. And as I discussed last quarter, where we have the desired level of capacity, stores are delivering comps more in line with our historical operating model. We remain on track to deliver a second year of record recruiting and have contracted more new graduates this year than in any previous year.” America’s Best produced outsized traffic gains in the quarter, but all three brands had a softer October. More optometrists and more scheduled exams would appear to be the driver.
