DULUTH, Ga.—National Vision Holdings, Inc. (NASDAQ: EYE) announced that its partnership with Walmart Inc. will be ending in 2024. This includes supplying and operating Vision Centers in select Walmart stores, providing contact lens distribution and related services to Walmart and its affiliate, and arranging for the provision of optometric services at certain Walmart locations in California. “We value and appreciate the contributions that our partnership with Walmart has had in helping us grow National Vision over the past three decades," said Reade Fahs CEO of National Vision.

“With the progression of growth opportunities in our freestanding brands—America’s Best and Eyeglass World—we have become the second largest optical chain in the U.S. and a major force in providing low-cost eye exams, eyeglasses and contact lenses to budget-conscious American families. While this decision was not expected, we look forward to beginning a new chapter as a more streamlined company ever more focused on delivering value to our stakeholders through our mission of making eyewear and eyecare more affordable and accessible. We are grateful for and thank all our associates and associated optometrists who have been part of our Walmart journey," he said.

Fahs continued, “As we look ahead, we remain focused on executing our strategic initiatives and changes to our cost structure to best align with our go-forward operating model. In addition, we remain focused on returning to a mid-single digit adjusted operating margin.”

On July 20, 2023, Walmart notified National Vision that it is not renewing its agreement for the company to operate Vision Centers inside select Walmart locations as of Feb. 23, 2024. Walmart also notified FirstSight Vision Services, Inc., a wholly owned subsidiary of National Vision licensed as a single-service health plan in California, that as of Feb. 23, 2024, it is ending the relationship whereby FirstSight arranges for the provision of optometric services at offices next to certain Walmart stores in California.

In connection with these non-renewals, Arlington Contacts Lens Service, Inc., National Vision’s wholly owned subsidiary, notified Walmart and its affiliate that it is not renewing its agreements for wholesale and e-commerce contact lenses distribution and related services. National Vision expects the AC Lens agreements will terminate on June 30, 2024.

National Vision’s Legacy segment, which consists of the operations and supply of inventory and laboratory processing services to Vision Centers in select Walmart retail locations, combined with the company’s wholesale distribution and e-commerce portion of AC Lens tied to Walmart and its affiliate, which is included in its corporate/other segment, contributed $348.9 million in net revenue and $15.0 million in Total Consolidated Earnings Before Income Taxes (EBIT) in fiscal 2022.

The company expects EBITDA contribution from Walmart and its affiliate businesses in fiscal 2023 to be lower than in fiscal 2022. In connection with the termination of these agreements, the company expects to record non cash goodwill and intangible asset impairment charges of approximately $60 million and $10 million, respectively, in the third quarter of fiscal 2023.

In its announcement today, National Vision also shared its preliminary unaudited financial results for the quarter ended July 1, 2023. The company noted that these preliminary results have been prepared in good faith on a consistent basis with prior periods, however, National Vision has not yet completed its financial closing procedures for the quarter ended July 1, 2023, and its actual results are subject to change and could be materially different from this preliminary financial information. Such preliminary information should not be regarded as a representation by National Vision or its management as actual results for the quarter ended July 1, 2023, the announcement said.

Those preliminary revenues for the quarter ending July 1 were $ 525.3 million, a 3 percent increase over the prior year's quarter. Adjusted comp store sales growth of 1.0 percent. Twenty-four stores were opened in the three-month period, and one store closed, ending the period with 1,381 stores. Net income was $5.6 million for the quarter.

National Vision noted that its fiscal 2023 second quarter performance was largely in line with its expectations and driven primarily by continued strength from its managed care business and ongoing execution of its strategic initiatives. The year-over-year change in adjusted operating income was primarily driven by the company’s ongoing investments in strategic initiatives and the normalization of incentive compensation, as the company expected, partially offset by the timing of certain selling, general and administrative expenses as well as lower depreciation expense in the quarter.

The company also today reaffirmed its fiscal 2023 outlook as previously communicated on May 11, 2023, and, given its year-to-date performance, the company expects adjusted operating income and adjusted diluted earnings per share (EPS) to be at or above the midpoint of its previously provided guidance ranges. Additionally, the fiscal 2023 outlook is forward-looking, subject to significant business, economic, regulatory and competitive uncertainties and contingencies, including constraints on exam capacity, many of which are beyond the control of the company and its management, and based upon assumptions with respect to future decisions, which are subject to change.

The company expects to provide more detail on its second quarter 2023 financial results and fiscal-year 2023 outlook on its upcoming conference call on Aug. 10, 2023, at 8:30 a.m. ET.