National Vision Holdings, Inc. EYE has continuously witnessed positive growth in same store sales (comps). However, rising costs may put pressure on the results of this Zacks Rank # 3 (Hold) business.

Over the past year, National Vision shares have outperformed industry it belongs to. The stock gained 67% compared to the industry’s 11.7% growth.

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

Composition growth in the first quarter of 2021 was 18.2%. The contact lens category continued to experience average ticket growth as contact lens customers increasingly adopt new technology lenses that have higher prices, a trend that is expected to continue.

The extension of the partnership with Walmart until 2024 looks encouraging. National Vision continues to generate positive results in the five additional Walmart Vision centers added in 2020. The company opened 25 new stores in the first quarter and finished with 1,230 locations, a 4.9% increase in the number of stores compared to the previous year.

Currently, National Vision is confident in its financial flexibility and liquidity to deal with this pandemic. Based on strong momentum since the start of the year, even in the midst of the pandemic, the company has raised its guidance for the full year, which is indicative of the uptrend.

National Vision Holdings, Inc.

National Vision Holdings, Inc. | Quote from National Vision Holdings, Inc.

In the first quarter of 2021, adjustable comparable store sales growth increased by 35.8%. Eyeglass World recorded an increase of 48.3% and America’s Best recorded an increase of 35.3%. The Legacy segment saw its compensation increase by almost 30%.

National Vision plans to continue to implement core growth initiatives and to invest to strengthen competitive advantages. The company has had a good start to the year with 25 openings in the first quarter and continues to plan to open approximately 75 stores in 2021. The company has a strong portfolio of specific locations to open new stores for 2021 and 2022 .

In addition, the company will remain focused on investing in television advertising and digital marketing. National Vision’s laboratory network is well positioned with the capacity in place to handle the anticipated needs in 2021. The company also remains focused on being a key supplier at low cost.

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

Additionally, National Vision plans to continually spend on TV advertising and digital marketing to maintain the growth trend in comps. Rising costs put pressure on its bottom line. In addition, the company’s strong dependence on a limited number of suppliers exposes it to a risk of concentration. The operation of the company in a difficult competitive environment as well as its strong dependence on suppliers are worrying.

Choice of keys

Some higher ranked stocks in the broader medical space includecApollo Medical Holdings, Inc. AMEH, Envista Holding Company NVST and Teleflex incorporated TFX.

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

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

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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