Move into 2026, this kind of, you know, kind of horizon change as we shift years.
Yeah, first and foremost, I mean, I could not have been happier with how the team executed, not just in 2025, but in the fourth quarter as well. So, you know, the strategy that we outlined at our investor day in November was one of shifting our model to a more, innovative digital joyful model in our stores, where we elevate the assortment, we nip-tuck some price, we think about our customer segments a little bit differently. And again, we're well underway on executing that strategy. And again, we're super pleased to reaffirm our guidance for the year and couldn't have been happier with the progress that we're making towards some of those end goals.
Great. You stepped into the CEO role in August of 2025, so it really hasn't been a terribly long time, and you've made some big transformations, but you joined National Vision in 2024 as it embarked on a period of significant transformation. For the audience, National Vision is obviously a vision care retailer operating under primary banners, America's Best and Eyeglass World. You had a remarkable 2025. Shares are up over 170% as a turn has begun to unfold with tangible data points. Very often, it's hard for investors to buy a stock that's up 170%.
Right.
So, you know, tell us where we are in sort of this transformation, very, very early stages. I've covered it since the IPO and how much more runway there is and why now is actually a very opportune moment.
It's a great question. And we still believe we're very much in early innings of our transformation strategy. You know, we've taken some of the early actions that are yielding stronger profitability, better comps back to mid-single digit range in 2025. So we're really, really pleased with that progress. But we have also been laggards in some regards. We've been laggards on changing and evolving our assortment. We've been laggards in pricing. We're building that pricing muscle. Historically, our approach to marketing has been one of one size fits all towards consumer acquisition. So as we're beginning to introduce more advanced capability, as we're beginning to segment our stores and our consumer, again, we're still at the very, very, very early stages.
But the results that we've seen so far, I think we're quite pleased with, and we think we have many years of runway left as we continue to evolve this strategic approach towards the consumer.
Great. Chris, I'm going to shift to you. You know, the notion is sort of this, what I like about the National Vision story is sometimes when we try to give like an investment thesis, this one's pretty simple. It's about moving from, you know, an analog sort of old world model to a digitally driven new world model. And within that, your eye strategy is grounded in four pillars. Number one, underdeveloped customer segments. Number two, product mix and categories. Three, the customer experience, and then new store growth. Can you elaborate on how these pillars drive value for shareholders?
Yeah.
You can go back and forth between the two of you.
Yeah, I'll start and Alex will jump in. So look, I think that what's exciting about all four of those pillars is that they're all pointed at a primary goal of ours, which is expanding operating margin expansion for the business. You know, through Q3, we're up 120 basis points. And as you look at the customer segmentation, the consumer segments that we're targeting are significantly more profitable per consumer than historically who we've pointed all of our organizational assets at. As we move up the premium scale from a product's perspective, both in frames and lenses, those all generate higher gross margin dollars to flow through the bottom line without the need for incremental investments in SG&A. New store growth, you know, we've moderated to about 30 stores in 2025. We'll keep that moderation through 2027.
But what we're doing is we're reinvesting in organic growth opportunities, like Alex was mentioning earlier, to help evolve and rapidly modernize the business to become a best-in-class retailer in the space.
Yeah, and in a lot of the product categories that we've played in, you know, for those of you who are not optical insiders, we still sell a lot of plastic lenses, and the category has evolved to Poly, which is a more impact-resistant, lighter lens. I often joke that, hey guys, we're keeping the plastic lens business in business, but we're rapidly advancing towards selling more premium lenses as well. And again, these are lenses that oftentimes have a higher insurance benefit attached to them. We just haven't been historically proficient at selling those. It's not that we don't have them. We can manufacture them just in the same way. But we're also evolving our approach to the consumer in the store, to create a more elevated experience around some of these lenses and lens offerings.
I love the example of your frame offering, right? Which, and correct me, but it used to be kind of the flip. The majority of them were sub $100 and something in pretty short time, right? You kind of have flipped that as we enter kind of the January timeframe, to the majority is now over $100.
Not quite yet.
Oh, not quite yet.
It was, when I joined in 2024, only about 20% of our frames were priced over $99. We exited 2025 with that number being about 40%. But we still have a lot of room to go. And, you know, one of the couple of things that give us great confidence in that is, as we've introduced more premium frames, within months, we have reached or exceeded industry turns on the more premium products. We introduced Ray-Ban Meta, the AI-powered smart glasses, in partnership between Meta, EssilorLuxottica , and Ray-Ban. It is one of our best performing products in our assortment. So we're seeing consumers raise their hand for these products as we introduce them. We introduced some great brands in 2025. We're introducing some more great brands in 2026 as we continue to evolve our assortment.
Important to note, though, is that we are not in all of this story of transformation. We are not abandoning our position as the obvious destination for value in the optical category. We truly believe that is still a winning recipe for our brands, but that doesn't mean that we can't introduce a bit more, a touch of luxury, a touch of premium, and certainly on the lens side, evolve our offerings. The neat thing about lenses, again, for those who don't live and breathe this business on a daily basis, lenses today, the way they're manufactured, the raw input is just a plastic puck, and how you generate the prescription on that lens, it's basically software that you program your generator, and it grinds the prescription into the lens. So there isn't anything from a capital investment perspective to manufacture the product or an IP perspective.
We have all of the capability. It's really taking the capability and the world-class assets where we've invested in our lab network to produce and then commercially sell the products that we can manufacture throughout our supply chain, so it's a really fun challenge to have because it's one of commercial model, not one of infrastructure.
And I love that you mentioned that because if you want a more tariff-insulated story, this is your story. The frames generally are imported, but that puck, right, all the processing is done here in the United States, correct? The value add.
We do have one partner lab in Mexico, but the vast, vast majority of our value add does occur in the domestic labs, correct?
Great. The other part of it is the customer experience. So the notion is kind of not abandoning your value customer, but adding on the managed care customer. So let's talk about kind of the penetration of that and the journey on that, where we could go. And Chris, if you can hop in here on the comp performance of those two segments over the past couple of quarters, that shows this is working.
Yeah, I'll talk a little bit about the consumer and then Chris, if you can break down the kind of margin and revenue implication, because it is, as Adrian pointed out, significantly different from consumer type to consumer type, so on the evolution of the managed care experience, it's about 40% of our mix today is managed care transactions. And those consumers, when National Vision was founded, it was in the low, low single digits. They kind of found us by accident. But by being a destination for value, we started to attract that segment because, as you pointed out, the notion of value resonates with them as well because there's an implied logic that your insurance dollars will go further at our brands. So, but we haven't historically optimized the model for those consumers.
So as an example, right, if we have a managed care customer that we're not helping them utilize the maximum frame benefit, which sits between $130-$150, in some cases as high as $300, we're actually not doing the right thing by that customer because in the world of managed vision care, that's not like a declining balance where the rest of the money sits somewhere in an account. If you have a $150 frame benefit and you pick a $99 frame, you've lost $50. So re-kind of calibrating our teams on how to help those consumers get the most value out of a benefit that they're paying for is a bit of a mindset shift, but one that we're executing. On the lens side, there's a lens tiering that exists in the managed care formularies.
Historically, we have not had a tier four progressive lens, which is the most advanced lens technology that you can get in a progressive, because it was historically believed that that's not who our customer was. Well, we've kind of disproven that ideal. But by not having a tier four progressive lens, we actually didn't have the product in the assortment that allowed for a managed care consumer to actually get the very most out of their benefit. Now, it's also the most out of pocket, but it's also the highest degree of savings versus what the non-managed care consumer would pay for. Again, it's just a pivot of the model to help our associates understand and help them with their consumers get the most value out of their plans and match their needs. Chris, if you want to talk a bit about the.
Yeah, absolutely.
Differential.
I think what's exciting when we think about the consumer cohorts that we're addressing, right, is a lot of these folks are walking through the doors of America's Best in Eyeglass World today. We just simply haven't been serving them and optimizing their experience and optimizing the use of their benefits, like Alex said. So as we bring more premium options for selection, we're seeing that, you know, especially on the managed care side, trade up into these more premium selections. And when you look at the profitability per customer, the difference between kind of our entry-level offer consumer and our managed care offer is not measured in percentages. It's measured in multiples. So what's great is as we're beginning to premiumize our assortment, better serve those customers, we don't necessarily have to go out and attract millions of new consumers to walk into the doors.
We simply have to serve the ones that are coming in better. I think an interesting point on the premiumization front, again, we're not abandoning our position of value. We're simply just providing a more diverse assortment of selections for our team and better articulating some of the benefits, particularly on the lens side. We're actually seeing the cash pay consumer trade up and comp from an average ticket perspective at a higher rate than our managed care consumers. So what that's telling us is even the cash pay consumers, the uninsured consumers walking in, are still very interested in some of these more premium assortments. So what that means for us through Q3 is we saw positive comps in both consumer cohorts. We saw comps positive on both ticket and traffic on the managed care.
On the cash pay side, we didn't see some nominal dilution in traffic, but because the folks that are coming in are choosing these more premium assortments, they're actually still comping positive as a consumer cohort, which is really exciting.
That's actually an important point that Chris raises is that we are being very deliberate on how we point our customer acquisition dollars against different customer cohorts because of the implied value that each of them have. You know, we don't measure the difference in progressives and managed care and outside our existing customers versus our historical targeted customer in percentage. It's in multiples. And I think that was the significant unlock in our strategic transformation is just how much more valuable certain consumers are, and in particular, those consumers that historically we hadn't actually distorted any of our acquisition investment to attract.
So, you know, a significant part of my thesis when I joined the company and the thing that we're executing against is turning our customer acquisition engine towards these more higher value customers and being more hyper-focused on profitability expansion through driving the right mix versus the historical approach of just being focused on driving an absolute traffic number, right? I mean, I've said this in multiple occasions that for us, it is much more important that we're winning with the right mix than necessarily kind of traffic on aggregate.
I think that's an important point on leverage, particularly from a marketing perspective, is we're not going to go invest significantly more dollars in marketing to attract these new consumer cohorts. We're simply redirecting the investments we have, pulling, you know, I like to exaggerate and say there's a pie chart where we're pointing 100% of our marketing assets at cash pay consumers' interest in the entry-level offers. As we redirect that mix, we'll attract more valuable consumers, but then we will also have the benefit of leveraging those marketing dollars better. It's not go invest more dollars to go attract these consumer segments. It's invest the same, get more from those dollars, and ultimately leverage the P&L and drive operating margin expansion.
And just to put a fine point on that, the managed care consumers' transactions, multiples of what in terms of dollar transaction of the cash pay, margins are, you know, plus or minus. So it's really the nice part about that is a dollar into investment in inventory, a dollar investment into advertising creates that halo, which then leverages the P&L as opposed to finding every last basis point on, you know, the margin dollars. We like that type of a story. The other thing that you kind of just speak to is opening the TAM aperture, right? So you're going after, I mean, as we all know, kind of in retail, right, the upper half of household incomes is two-thirds of the spend. So you're leaving so much money on the table.
So many of these things, the secular growth in healthcare, the medical necessity, so many of those kind of fit and check our, you know, boxes, which is why kind of one of our top picks. So having said that, let's kind of move to the macro. 2025, volatile in so many different ways, did a fine job and a wonderful job, you know, accelerating the business, expanding margins. How sensitive is National Vision's business to macroeconomic shifts? More changes to come clearly as we go into 2026. Can you describe the current competitive landscape? You've been on, you know, luxury and everywhere. And where do America's Best and Eyeglass World fit into the competitive landscape?
Great question. So, you know, this is a more macro-resilient category than kind of traditional hard lines, soft lines, especially ones that have more consumer discretion. Again, it's a category that today is fueled by managed vision care. And managed vision care is 70% of the category and only 40% of our business, but growing now. And those are consumers that get an annual eye exam as part of their benefits. So we do see a lot more resiliency because of that notion. We also live in a category where, as much as we like to believe in, you know, that eyewear is super fashionable, 80% of consumers are still triggered into the category by, "I have noticed a change in my eyesight, and therefore I have to take action." And vision is the most valuable sense that we all have.
So those components actually make this a very resilient category. Now, I think historically, though, our challenge has been, as you point out, playing within the category in a bit more of a, I use the word joyful a lot, being a bit more joyful, being a bit more energetic, being a bit more advanced in our in-store offerings to make us a more obvious destination. We relied so heavily on the message historically of price and value, and we are still, like I said, going to be the obvious destination for value, but that doesn't mean that we shouldn't provide great brands, great products, a more engaging experience in the store because of where we sit. In the market, you have, about 50% of the market is still owned by independent optometrists, the kind of boutique individual owner shops. There is some private equity consolidation that's in the space.
Call it maybe, you know, 5%-10% of the independent market that's been consolidated by PE. You have optical retail chains that range anywhere from the more premium luxury brands like LensCrafters to the more care-focused brands like Pearle Vision. Again, we think we have a really strong, unique position as the optical retail chain with over 2,000 employed optometrists. We have world-class equipment. We provide. We're the only optical retailer at scale that can offer digital retinal imaging to every one of our patients. That's a big deal because it gives you the insight into the interior health of the eye versus just the prescription, so we're kind of. We got the right assets to win there, so our recipe is phenomenal care with over 10% of the optometrists in the U.S. employed by us, making the experience a bit more joyful and continuing to lean into value.
We think that is the winning recipe for the company and differentiates us from the competitive set.
Great. Just to kind of step into the future a bit, telehealth has been a big priority coming out of COVID. How has that changed? And either from a financial standpoint or from a strategic standpoint, how has it changed the direction of travel of the overall, the longer-term story?
Yeah, so we've invested in remote health technology in just over 70% of our fleet, where a doctor can see a patient from kind of the comfort of their home. Over 10% of our exams are now done in this mode of practice, and we're starting to experiment with what we call remote hybrid, where we actually have a doctor in one location taking care of a patient in another, so essentially using that to leverage capacity across our network in a different place, so we've made the investments. We're doing a great job attracting consumers into that space and think there's certainly more opportunity there. The next kind of phase of our investment thesis in advancing the company from a technological perspective is actually in our marketing stack, so we started in 2025 to revamp our CRM platform. We chose Adobe as our partner to advance our CRM capabilities.
We've gotten our entire CRM stack moved over. We're starting to bring in new consumer journeys, and in 2026, we're transitioning all of our e-commerce to the Adobe stack as well because we see that there is a longer-term vision of how you can connect a more digitally-first CRM and marketing and acquisition strategy to a more advanced e-commerce strategy, and then lastly, tying in the kind of notion of care through a remote delivery of eye health, so those three things aren't necessarily too disparate things. We do have a point of view on how those things long-term tie together and help us to evolve the organization.
Great. In our last couple of minutes, Chris, I'll come back to you. You recently had an analyst day where you gave some long-range targets, long-term targets that are highly attractive and suggestive of a retail compound growth story. Can you remind investors of the longer-term algorithm and what are the key financial milestones investors should watch for the next one to three years?
Absolutely. And I think what you said earlier is spot on, right? Our long-term growth algorithm is actually quite simple, which is beautiful, right? We're looking to drive high single-digit revenue growth over the course of the next five years every year, mid-single-digit comps on an annual basis, and an expansion of operating margin between 50 and 150 basis points in any given year. And as you look at what we've delivered in 2025, even through Q3, you see that we've met all those criteria, which has delivered a lot more operating margin to the bottom line. But what's exciting is you look at our strategy, right? We've really just begun scratching the surface of some of our strategies around frames, the store, and around infrastructure investments that Alex mentioned.
What that translates to, you know, if you run that over five years, that restores National Vision back to kind of where it IPO'd from an operating margin rate of around double-digit percentages. From a capital perspective, you know, the great thing about this category is the category spins off of a lot of cash. We'll continue to invest about 4%-5% of our revenue into capital expenditures on an annual basis. 1%-2% will be on store refreshes, remodels, relocations, and the remaining will be moderated to continued investments in some of these key strategic pillars, like we spoke about the Adobe CRM stack. We implemented a new ERP in 2025, additional enhancements there, our new unified commerce model in 2026, while still being a net grower of stores through 2026 and 2027.
Then as we go from 2028 beyond, we believe we'll be in a position that we'll be able to re-accelerate new store growth. But what's really exciting is re-accelerate new store growth with this improved and modernized operating model, which should only help drive better ROI on those new stores.
Fantastic. In our last 20 seconds, Alex, I'll give you the last word here. What gives you confidence that this is achievable over the long term? And what would you say for investors to watch as maybe a bigger risk or something that they should be watchful for?
Yeah, so first and foremost, again, I'll end with what I started with. I could not be more pleased with the team, the executive team that we have in place. I've said this before. If you look across the people that I get to work with on a daily basis, this is a management team that's punching above its weight class. And we have recruited individuals that have just phenomenal experiences, great pedigrees, and are super bought into the journey and the opportunity that we're on. So what gives me confidence is the people that Chris and I get to work with on a daily basis, truly, truly world-class talent that's all pulling in the same direction. That coupled with what is a really obvious thesis around the evolution of the consumer. So we have the right people.
We have a really clear kind of picture of where we can take the business based on some of the historical things we know about the consumer and where we think the consumer can go. So those are the couple of things that just give me a high, high degree of confidence. Again, from a macro perspective, you know, I think we're a fairly insulated company. We have a fairly insulated category given some of the managed care components, given the fact that we do play at the intersection of health and retail. You know, there's always macro things that can create noise. My perspective is if we execute our game plan that we shared at our investor day, that we're continuing to share, we control our own destiny.
Fantastic. Thank you very much for allowing me to host you and best of luck for 2026.
Thank you.
Thank you.