Man did I call it or what! The fun is just beginning folks. Put on the rally caps.
Insider Buying at National Vision
iionline.com
12/9/98 Insider Buying and Strong November Sales at National Vision
At the close of October, Barry Feld, the Chief Operating Officer of National Vision Associates (NASDAQ:NVAL) bought 100,000 shares at prices between $3.94 and $3.97, which brought his holdings to exactly 100,000 shares.
Recently announced strong sales lend credence to Feld's bulishness. On December 10, the company announced that sales for the five weeks ended December 5 were $31.7 million, 64.1% above the comparable five-week period one year ago. The 1998 amount, however, includes revenues of $5.2 million for Frame-n-Lens and $5.8 million for New West Eyeworks, both operations that were acquired during the year.
Comparable store sales, a measure utilized by retail analysts that includes only those centers open a full year, were higher by 2.5%. Analyst Andrew LaGrone of Sterne, Agee, Lynch, had been looking for 4% growth.
During the third quarter, National Vision's year-over-year revenue soared 48%, though per share earnings of $0.09 were flat, hurt by interest expenses that relate to the companies aggressive acquisition strategy.
National Vision CFO Angus Morrison told us that while National Vision tries to maintain 3-4% in comparable sales, the disposable contact business, which typically provides around 10% of revenues, turned highly competitive this past quarter, with at least one competitor pouring promotional monies into lower pricing.
Mr. Morrison explained that National Vision is doing well integrating its New West and Frame-n-Lens acquisitions, adding that Frame-n-Lens, which had shown negative comparable store sales, recently turned positive. The integration process, the CFO said, is moving toward expectations, with one administrative center and two labs currently consolidated and one to go.
National Vision, the nation's second-largest eyewear chain, is pursuing the strategy of acquiring smaller chains to wean itself from Wal-Mart, in which most of its stores have been located, to gain ground on industry leader Cole National, which offers the Pearle Vision brand. Since 1997, National Vision has doubled its store count to more than 900.
National Vision's marketing strategy is to offer prices 30-40% below competitors through the use of centralized manufactories and three or four day delivery, as opposed to "about one hour" delivery.
We continue to be excited about the prospects at National Vision, given its opportunistic value-oriented strategy for internal and external growth in the still-expanding eyewear industry. Today's improving numbers are a step in the right direction. Stern, Agee's LaGrone believes the process of digesting recent acquisitions will be complete by the beginning of 1999. LaGrone looks for earnings per share growth of 79% in 1999, driven by same store sales growth of 4%, store buildout of 5%, and a managed care business growing 8-10%.
LaGrone expects National Vision to earn $0.19 per share for 1998 and $0.34 per share for 1999. He argues for a 20 multiple, based the assumption of compound annual growth of 20%-plus over a 3-year period; that assumption leads to a price target of $7 per share.
We are bullish on National Vision, given the company's growth strategy and value approach to marketing, and we believe shares might well exceed Mr. LaGrone's forecast over the next twelve months
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