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National Vision Holdings, Inc. (NASDAQ:EYE)
Q1 2018 Earnings Conference Call
May 15, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to National Vision's first quarter 2018 earnings conference call. My name is Brian and I will be your operator for today. At this time, all participants are in a listen only mode. Following prepared remarks, we will host a question and answer session and our instructions will be given at that time. If during your conference, you require operator assistance, please press * and then 0 and an operator will be happy to assist you. As a reminder, this conference call may be recorded for replay purposes.

It is now my pleasure to turn the conference over to Mr. David Mann, Vice President of Investor Relations. Sir, you may begin.

David Mann -- Vice President of Investor Relations 

Thank you, Brian, and good morning, everyone. Welcome to National Vision's first quarter 2018 earnings call. Joining me on the call today are Reade Fahs, Chief Executive Officer, and Patrick Moore, Chief Financial Officer. Jeff McAllister, our Chief Operating Officer, is also on the call and will be available during the question and answer portion of the call. Our earnings release issued this morning and supplemental presentation which will be referenced during the call are both available on the investor section of our website, nationalvision.com.

In addition, a replay of this morning's conference call will be available later today. The replay number as well as access code can be found in the earnings release. A replay of the audio webcast will also be archived on the investor section of our website.

Before we begin, let me remind you our earnings release in today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission.

The release and today's presentation also include certain non-GAAP measures. Reconciliation of these measures are included in our release and the supplemental presentation which can be found on our website. We also would like to draw your attention to slide two in today's presentation for additional information about forward-looking statements and non-GAAP measures. In additional, from time to time, National Vision expects to provide certain supplemental materials or presentations for investor reference on our investor section of our website.

Turning to slide three, on today's call, we will discuss recent business highlights. Patrick will then review our first quarter 2018 financial performance and our fiscal 2018 outlook. Following these prepared remarks, we will open the call for questions. Now, let me turn the call over to Reade.

Reade Fahs -- Chief Executive Officer 

Thank you, David. Good morning, everyone. It's a pleasure to be speaking to you on my birthday to share our first quarter results.

Turn to slide four. We are pleased to report our 65th consecutive quarter of positive comparable store sales growth. This streak began over 16 years ago when many members of our current management team started at National Vision. We are certainly proud of the consistency of this track record.

Q1 adjusted comparable store sales growth was up 4.6%. This result was at the higher end of our full-year comp guidance range. The growth was led by Eyeglass World, with a 6.3% comp and America's Best with a 4.6% comp. During the quarter, Eyeglass World successful launched its Mr. World advertising campaign and America's Best continued the national advertising of its catchy owl campaign.

Our sales strength was broad-based, with positive comps at all of our brands. This was the second consecutive quarter that our teams delivered positive comps in all of our store brands. We're pleased with the improved execution we're achieving at the store level. In the end, retail is about store-level detail and we remain focused on making sure that each and every patient and customer receives great eye exams and customer service on their glasses and contact lens purchases in each of our brands every day in every store.

Comparable store sales growth was driven by increases in customer transactions and average ticket. Another sign of customer transaction is Net Promoter Scores, which we track closely. In the quarter, our Net Promoter Scores improved on a consolidated basis, led by America's Best. We opened 15 stores during Q1 to end the quarter with 1,027 locations or a 6.8% increase in store count over the first quarter last year. All of the openings were in our America's Best brand.

The unit growth and comparable store sales growth combined to drive a 10.3% increase in net revenue. Adjusted EBITDA increased 3.7% and adjusted net income grew 15.5%. As we noted on our last call, we expected first quarter EBITDA growth to be more modest relative to growth expected for the year, primarily due to timing of certain expenses and incremental costs associated with operating as a public company that collectively impacted adjusted EBITDA growth by approximately 500 basis points. Based upon our performance to date, we're reaffirming our 2018 outlook, which Patrick will take you through in a few minutes.

So, why don't you turn to slide five now? Our business continues to demonstrate consistency of store performance and comp store sales gain. The graph highlights our 65 consecutive quarters of comparable store sales growth across the economic cycle during both strong and weak economic times. As I mentioned earlier, our comps growth was driven by both gains in customer count and average ticket.

When we last spoke in March, we were in the middle of our peak selling season. As many of you endured personally, there were four Nor'easters in the month, three of which fell on weekends. But we are fortunate to be in a category where the purchase is tied to a medical necessity. Based on our experiences over the years, impacts of weather generally only postpone purchases and balance out over time. as I like to say, during a bad storm, people stay home but their vision continues to get worse.

We are essentially seeing a year to year business pattern similar to last year, with some of our peak traffic flowing into the second quarter. Our consistent positive comp results highlight the benefits of operating in a growing industry, having a leadership team of optical experts, new store growth, as well as comparable store sales growth in our more mature stores as customers keep coming back.

We continue to believe that we're gaining market share with our low-priced operating model and our highly experienced management team continues to focus on executing every day one patient and one customer at a time.

Turning now to slide six, we remain focused on leveraging our competitive advantages and capitalizing on the significant growth potential that exists for National Vision. First, new stores are a primary focus given the significant whitespace opportunity relative to our current footprint. We opened 15 stores in the first quarter and continue to plan to open 75 stores this year, executing on the formulas that have worked well for us as a task.

Our pipeline of locations remains strong for this year and into 2019. The majority of our openings will be in our America's Best brand with a remainder in Eyeglass World. Store growth is expected to skew slightly more toward openings in new versus existing markets. We're excited to offer more patients and consumers the opportunity to save money on eye exams, glasses, and contracts.

Optometrists continue to play a key role in our company's success and in our mission to deliver improved eyecare to communities throughout the US. Simply put, we want to be the best place for optometrists to practice. Overall, our optometrist retention rates remain stable to last year and we remain highly focused on filling our need for new optometrists.

Our team expects to continue to drive comparable store sales growth in 2019, even with lapping the strong multi-year comparisons. Our key comp drivers are the comp waterfall for maturing stores as well as vision insurance and marketing initiatives. Our new stores take several years to fully mature as customer awareness builds. With an infrequent purchase cycle for eyeglasses, it can take time for potential customers to find the store after it opens, but when they do, we believe the love what they find.

We strive to ensure that our customer gets the best value around and we believe that our growth brands deliver incredible values. Our customers can buy two pairs of eyeglasses for $69.95 including a free comprehensive eye exam at America's Best or two pairs of glasses for $78.00 at Eyeglass World and get them the same day. We believe that this combination of extreme value backed by excellent customer service leads to satisfied repeat customers with positive word of mouth.

Participation in vision insurance programs remain a positive comp driver. We've experienced strong growth and net revenue from these partnerships, which continued in the first quarter and we believe there are still opportunities to expand relationships and increase penetration with vision insurance providers. We continue to believe that we remain under penetrated relative to the industry in the percent of our business coming from vision insurance.

Marketing also remains a key factor in attracting customers and driving traffic to our stores. Given that eyeglasses are a relatively infrequent purchase, television advertising plays an important role for us. We continue to utilize television advertising to catch our customers' attention whenever they are in the market. Our owl TV campaign differentiates the America's Best brand and the reach of national advertising now reminds consumers throughout the country that they paid too much if they didn't shop at an America's Best.

In the first quarter, we launched new television advertising at Eyeglass World. We're very encouraged by the early customer response to this Mr. World campaign, which we believe was a factor in the brand's strong 6.3% comp sales in the first quarter and are expanding the footprint of the campaign to cover all the Eyeglass World stores.

We have owned Eyeglass World since acquiring it in 2009. We turned around the concept and it continues to be a solid performer. Eyeglass World has new brand leadership for almost two years now, bringing fresh energy to the brand. I really like what the current team is doing. We're delivering a more consistent store experience.

Eyeglass World also now has the benefit of a TV campaign that better communicates the brand and experience to consumers. As the tag line says, "Eyeglass World is the world's best way to buy glasses." I'm more excited than ever before about the Eyeglass World opportunity for future growth.

In terms of operating productivity, as a value retailer, we promote a low-cost culture. We can't beat everyday low price without being every day low cost. Our centralized lab network is the key reason we are everyday low cost. Within our labs, we operate what we believe is a world class manufacturing operation that provides a true competitive advantage. We are currently working to open our fourth domestic lab in Texas, which will bring our network total to six labs. This new lab will add the necessary capacity to keep up with our growth, feature the latest state of the art equipment and processes that further lower our unit cost and provide the security of economic diversity. We remain on schedule to be operational in time for the first quarter next year.

Last week, we announced the transition of our lab and supply chain leadership. Charlie Foell will downshift from his role of SVP of Manufacturing and Distribution as of June 30th, and will remain at the company to focus on special projects. Bob McKinzie will succeed Charlie as Senior Vice President of Manufacturing and Supply Chain. Bob has over 30 years of experience in the optical manufacturing industry and has been working closely with Charlie for the past 12 years. We are fortunate to have a deep bench of experienced optical experts at National Vision.

Lastly, regarding our omnichannel investments and capabilities, we are starting to leverage our one view of the customer. In addition, we continued to see improvements in the online scheduling of eye exams. Online penetration into the optical retail sector remains modest, especially for eyeglasses. However, we believe that an omnichannel or blended channel approach is going to be an evermore important part of the optical buying process in future years and we aim to be ahead of this curve.

At this point, let me turn the call over to Patrick for a more detailed discussion of our financial results.

Patrick Moore -- Chief Financial Officer

Thanks, Reade and good morning, everyone. Turning to slide eight, as Reade noted, our business continued to perform well in the first quarter and is likewise well-positioned for the balance of 2018. The two fundamental revenue drivers of our business are new store growth and comparable stores ales growth.

During the quarter, we opened 15 new stores and closed one location all in our America's Best brand. Over the last 12 months, we have added 65 net new stores or a 6.8% year over year increase, with the openings almost entirely in our America's Best and Eyeglass World brands. For these two growth brands, unit growth increased 10% in the quarter.

Our 2018 planned openings are skewed toward newer markets and we continue to expand our store base and invest in these markets where our new stores are still ramping and building awareness. We have noted that new stores can take approximately three to five years to mature. We are excited about these markets and see a lot of our potential customers there.

The chart of our adjusted comparable store sales growth presents our comps calculated on a cash basis. Same store sales growth increased 4.6% versus the 4.4% increase in the first quarter of last year. The comp growth was at the high end of our 2018 outlook and driven by increases in our customer transactions and average ticket.

During the first quarter, we again generated positive comps in all five brands, eyeglass world and America's best drove the growth with gains of 6.3% and 4.6%, respectively. Legacy comps increased 3.3% in the first quarter. Of this growth, we estimate 205 basis points of benefit from incremental eye exam revenues tied to the resulting volume shift from FirstSight. Exploiting the benefit of this transition, we are encouraged the underlying business results in the legacy segment continue to be positive. Additionally, we're pleased with the positive comp trends at our smaller imprint and our host brands. Our legacy and host businesses are benefiting from improved store execution.

Turning to income statement highlights on slide nine, net revenue increased 10.3% to $408 million. During the first three quarters of 2018, the company will experience the elimination of approximately $6 million in revenues and cost associated with FirstSight operational changes that occurred in 2017. In the first quarter, the impact was a reduction of net revenue of $1.8 million, which had the effect of lowering revenue growth by 50 basis points but with no material impact on profitability.

As Reade mentioned, compared to the first quarter last year, we experienced a high level of store closing dates from weather, with the most pronounced impact in March. Adjusted EBITDA increased 3.7% and adjusted EBITDA margin fell 90 basis points to 15% in the quarter. As indicated on our last call, we expected slower EBITDA growth as well as margin deleveraging in the first quarter due to the timing of the net change in unearned revenue, new public company cost, and the timing of incentive compensation.

The impact of these items was approximately $3 million. Our first quarter EBITDA growth would have been approximately 500 basis points higher excluding the impact of these three items.

As a reminder, net revenue and adjusted EBITDA results do not include amounts reflected as deferred revenue. Recall that deferred revenue is generated from our eye care club and eyeglass warranty programs and provides current period cash benefits not reflected in our income statement. For the first quarter of 2018, there was a $4.3 million net increase in deferred revenue.

Cost applicable to revenue increased 8.8% for a decrease of 60 basis points as a percentage of net revenue versus last year. The decrease was primarily driven by $2 million inventory write-off in the first quarter of 2017. We also continued to experience higher optometrist-related expenses due to expanded coverage in wage inflation in certain geographic markets.

Four our optometrists, we are glad to pay competitive salaries for the good work that they do. We wok very hard to attract and retain optometrists and compensation is obviously an important part of this equation.

SG&A expenses increased 13.5% for an increase of 120 basis points as a percentage of net revenue versus last year. This increase was primarily driven by store and corporate payroll and to a lesser extent advertising, occupancy, and performance-based incentive compensation. The three items mentioned earlier, the net change in unearned revenue, public company cost and incentive compensation all contributed to the deleveraging of SG&A expenses.

Depreciation and amortization expense increased $3.3 million compared to the first quarter of last year. The growth reflects our ongoing investments in these stores, our network of optical laboratories and our omnichannel related investments that were capitalized in the fourth quarter of 2017. Interest expense decreased $2.2 million versus the first quarter of last year. This represents a $3.4 million reduction due to lower debt levels driven by the $360 million IPO debt paydown in the fourth quarter of last year, partially offset by incremental interest of $1.5 million associated with our derivatives.

Our reflective tax rate was 17.4% compared to 33.1% for the first quarter of 2017. The company's federal statutory rate increased to 21% as a result of the 2017 Tax Act. Also included in the income tax provision for the quarter was an approximate $2.7 million income tax benefit from stock option exercises, which increased our effective tax rate by 8.9%.

Adjusted net income was $26.9 million compared to $23.3 million in the first quarter of 2017 and excluded the income tax benefit from the option exercises. Adjusted diluted EPS was $0.35 compared to $0.40 last year, which reflects the increase in shares from our initial public offering.

On slide 10 at the end of the first quarter, our total debt was $569 million and our cash balance was $58 million. Our balance sheet now reflects the impact from the required implementation of new revenue recognition rules. The new standard requires acceleration of revenue earlier in Eyecare Club contract period.

The new revenue guidance will have minimal ongoing impact to our annual revenue recognition. However, there was a reduction of our deferred revenue liability for Eyecare Club sales of approximately $26 million at the end of the first quarter. We expect this standard to have a favorable impact on total 2018 annual revenues of approximately $1 million.

For the quarter, we invested $22.8 million in capital expenditures with the majority of the CapEx focused on growth initiatives. Cashflow providing increased over $30 million. Our cashflow will be aided by the ongoing cash benefit from tax return during 2018.

Let me provide an update of our view of usage for this cashflow. Given that we have been consistently reinvesting at a high rate over the last several years, we believe we are in a great position at this time and are well positioned for continued growth. We continue to assess growth investments, including improvements in our customer-facing technologies for stores and online. We approach any potential new investment with the strict capital discipline we have always employed with the goal to deliver investment returns that drive shareholder value. We also continuing to evaluate options that would result in balance sheet enhancements over time.

Turning to slide 11, based on our performance year to date, we are reaffirming our fiscal 2018 outlook as follows -- net revenues of $1.485 to $1515 billion, adjusted comparable store sales growth in the range of 3% to 5%, opening approximately 75 new stores, adjusted EBITDA between $172 million and $177 million, and adjusted net income between $52 million and $56 million.

We continue to believe it is prudent and responsible to plan the business in the 3% to 5% comp range. Store openings this year will predominately be America's Best locations, with the remainder being Eyeglass World stores, similar to the mix of openings between these brands here in 2017.

The timing of the America's Best openings will follow a relatively consistent cadence across the year while the Eyeglass World openings are generally planned for the second half. We project a couple of closings as is typical each year.

Consistent with our reaffirmed outlook, we continue to expect the rate of adjusted EBITDA growth to improve as the year progresses, with stronger adjusted EBITDA growth in the second half of 2018. We expect adjusted EBITDA margin to be relatively stable on a year over year basis, despite over $2 million incremental public company cost this year. We are highly focused on managing cost in an environment of rising wages and we continue to reinvest in growth and build out our omnichannel capabilities.

For modeling purposes, we continue to expect our full year 2018 tax rate to be approximately 26%, including the impact of stock option exercises, which could cause some fluctuations in our quarterly tax rate.

Finally, we estimate annual interest expense of $27 million to $38 million, depreciation and amortization of $72 million to $73 million, and capital expenditures between $100 million and $105 million.

In summary, we remain confident in our financial commitments for 2018. We are focused on executing our 2018 growth initiatives and we believe we are well positioned for the balance of the year.

Now, I'll turn the call back over to Reade.

Reade Fahs -- Chief Executive Officer 

Thank you, Patrick. Turning to slide 12 -- before we open the call up for questions, let me take a moment to share a recent customer interaction in one of our Walmart vision centers. In late April, we received a letter from the mother of a 12-year old boy, who was struggling with headaches.

During a routine comprehensive eye exam, the optometrist diagnosed an extremely blood pressure condition that needed immediate medical attention. She took her son to a nearby hospital where he subsequently received emergency kidney surgery. His mother wrote to us saying, "Thank you for saving my son's life." Once again, we are reminded how our comprehensive eye exams are routine until they are not.

I want to thank all the nearly 11,000-person team at National Vision, which includes the 2,000 optometrists that service patients at or near our stores every day in over 1,000 storefronts. They provide a much needed medical service that helps to improve and change the lives of thousands of Americas. Sometimes, we even save lives too. This is a team to be proud of.

We're fortunate to have a fast-growing business engine whose success can fuel our philanthropic efforts. We continue our dedication to progressing the work of the ecosystem of our optical social enterprises and philanthropies. A New York Times article on May 6th stated that untreated vision problems are the biggest health crisis you've never heard of. Eyeglasses are a simple way to improve a billion lives worldwide.

We strive to be the best at providing low-price eye exam glasses and contact lenses. While both at home and abroad, we work to bring glasses and consequently sight to those that would be unable to see well otherwise. This is why we believe optical retailing is a noble profession.

This concludes our prepared remarks. At this time, I'll turn the call back to Brian to start our Q&A session.

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, at this time, if you'd like to ask a question over the phone lines, please press * and then 1 on your telephone keypad. If your questions have been answer and you wish to remove yourself from the queue, press the # key. Once again, ladies and gentlemen, to ask a question, that is * and then 1. Our first question will come from the line of Paul Lejuez with Citi. Your line is now open.

Paul Lejuez -- Citi -- Managing Director

Hey, thanks, guys. I'm curious as you look at the quarter as a whole, in total it came in line with your expectations, your reiterated guidance for the year. But I'm curious what were the positive and negative surprises, even as small as they might be, to you guys during the quarter and how that might influence any of your thinking about the rest of the year. That's my first one. Thanks.

Reade Fahs -- Chief Executive Officer 

Good. On the positive side, we liked that we had another positive consecutive quarter and that it was still driven by customer count. We liked the Mr. World campaign success. What we do with those things is hold out the control markets and do test markets. The fact that that worked well and we expanded it, we liked that our Net Promoter Scores continued to improve, all positive. We liked that we came through on the new store openings and all, all good things there.

On the negative side, I'd say that the weather has been a weird one of late. We had all the Nor'easters in March, which sort of lengthened out our peak selling seasoned and I'd say sort of the tax refund stuff was about the same time as last year and it lengthened out the peak selling season.

I'd say there's a plus side to the lengthening of our peak selling season. It means that there's less stress on our optometrists and on our labs versus a more concentrated selling systems. It makes for seasons. It makes for happier customers and patients and happier associates along the way that not everyone is coming in the door at the same time. So, we like the lengthening that took place there. Those are pluses and minuses.

Paul Lejuez -- Citi -- Managing Director

Any quantification of what the negative weather did to you guys in the quarter and what sort of an impact you would expect in 2Q, maybe from some pent up demand there?

Reade Fahs -- Chief Executive Officer 

We don't comment on our current quarter, but we did lose about 400 store days in Q1. So, that was real impact. It also matters when those store days are, when they're weekends and big selling days, that hurts even more. As I mentioned earlier, though, our customers stay at home. Their eyes get worse. They need to come eventually.

Paul Lejuez -- Citi -- Managing Director

Gotcha. Last one for me -- deferred revenue was a bit lower in 1Q versus last year. I think you said that was partly driven by slower growth and warranty program sales and Eyecare Club membership sales. I'm just wondering what was the reason for the slower sales on those two items, if that was expected and how we should be thinking about that line item going forward?

Patrick Moore -- Chief Financial Officer

Yeah. On the deferred revenue side, the Eyecare Club sales are being affected by our increased penetration and managed care program. So, Paul, as we sell to customers that have managed care, the eye exams are separate and the club, we obviously are offering the option to get free exams or multiple exams over a few years. As we increase our managed care business, we increase those club sales.

Warranty is growing a little less than the overall rate of revenue growth but still relatively good growth here in warranty.

Paul Lejuez -- Citi -- Managing Director

Gotcha. Good luck. Reade, happy birthday.

Reade Fahs -- Chief Executive Officer 

Thank you, Paul.

Operator

Thank you. Our next question will come from the line of Dan Binder with Jefferies. Your line is now open.

Dan Binder -- Jefferies -- Managing Director

Hi, it's Dan Binder. Happy birthday from me as well.

Reade Fahs -- Chief Executive Officer 

Thanks.

Dan Binder -- Jefferies -- Managing Director

My question was around the vision insurance programs and your penetration. If you can just give us a bit of an update on how much that has improved year over year, how much more you think there is to get. Then a second question just around gross margin rate and expenses, just curious if those line items came in as expected or if there were any surprises in there.

Reade Fahs -- Chief Executive Officer 

So, on the managed care front, we have said historically that we are underpenetrated in managed care relative to most of the industry. For most of the industry, the majority of their traffic comes from managed care and it's less than that for us and it is growing nicely. We're underpenetrated for a few reasons. When we bought America's Best, they weren't even taking insurance. So, that's one reason.

Frankly, a lot of our target consumers are uninsured. So, they don't have insurance, so they're out there seeking the absolute best value not being directed to a specific network, but it's growing nicely. We continue to see opportunities in the growth of managed care. There are plans that we are not yet in. I've said it here and there in the past that it's episodic in nature. You sort of present your credentials to plans and every now and then on an episodic basis, you get into plans you're not in and that's always incremental traffic along the way.

So, underpenetrated relative to the industry, the market, and our competitors, growing nicely, still plenty of opportunities for continued expansion of managed care.

Patrick Moore -- Chief Financial Officer

And then hey, Dan, it's Patrick -- in terms of the gross margins, those came generally where we expected, at an overall level of gross margins were up about 60 BIPs, but as we disclosed, we had a $2 million inventory write off last year in Q1 that helped that. We kind of zero in on owned and host, you'll see that gross margins are down around 30 BIPs. That's what we're seeing there in terms of a little bit of wage pressure for ODs and associates, offset by the increased level of just eye exams. But in general, pretty consistent with what we expected and what we expect.

Dan Binder -- Jefferies -- Managing Director

The expense side was more or less in line too?

Patrick Moore -- Chief Financial Officer

Would you please repeat that?

Dan Binder -- Jefferies -- Managing Director

I was just saying was the expense side more or less in line as well?

Patrick Moore -- Chief Financial Officer

Yeah, on the SG&A side, we were up around 120 basis points and a little over half of that was the three items that we called out. There were three key items that I actually referred to on the Q4 back in early March that I said would effect the quarter. One was simply that the pub code drove over impact of having that $2+ million this year. The second was really timing of incentive comp and that was more about it being very low and 17 versus 18 and then finally, the unearned revenues were a negative impact in the quarter. We had guided on all of that as we discussed the quarter back at the end of the fourth quarter.

As the year moves on, we expect that to moderate a little bit, we also discussed that we expect to see profitability levels a little stronger in the second half. So, I think that will come in blind.

Dan Binder -- Jefferies -- Managing Director

Great. Thank you.

Operator

Thank you. And our next question will come from the line of Zach Fadem with Wells Fargo. Your line is now open.

Zach Fadem -- Wells Fargo -- Analyst

Hey, good morning, guys. Could you walk us through your expectations for the comp in a little more detail, specifically for America's Best? Where do you expect the comp to be on your 3% to 5% guidance range? As we move throughout the year, do you expect to remain within that range for each quarter this year or are there any quarters you anticipate to be above or at the low end of the range?

Patrick Moore -- Chief Financial Officer

Hey, good morning. It's Patrick. In terms of comp guidance for the year, we've not -- we probably aren't guiding at the brand level. The 3% to 5% comp range is an annual figure. As we've seen, we have some quarter to quarter fluctuations at times, but we typically see nice consistency over a longer period of time.

As I look out at the rest of the year, Reade's kind of mentioned and discussed Q1, he's talked a little bit about peak season extending somewhat into Q2. Q3, we have a little easier grow over. We had the storm impacts last year. We communicated those amounts. Then obviously Q4 will be a little tougher. That's probably a little bit of insight in terms of comp cadence for the rest of the year.

Zach Fadem -- Wells Fargo -- Analyst

Okay. That's helpful. I'm curious if you could speak to brand awareness in your markets. First of all, how do you track improvements in this metric internally and when comparing your newer markets to existing markets, how does brand awareness typically trend and do you anticipate improvement with the new ad campaign going forward?

Reade Fahs -- Chief Executive Officer 

We on a periodic basis track brand awareness. So, we're watching that, but we're a pretty consistent advertiser. We don't have massive fluctuations because we believe that people come into this category pretty evenly throughout the year, so we generally keep marketing pretty evenly throughout the year. Last year, we started national advertising in the beginning of the year and so, our belief is that more people are aware of us even if our stores are not there yet. My aunt is in New York City. She says they see the ads all the time. So, we believe we're building awareness in markets we've yet to open stores in.

Zach Fadem -- Wells Fargo -- Analyst

Got it. If I can ask just one more -- could you update us a little bit on the relationship with Walmart? Any anticipated evolution there one way or the other in the segment? Are there any factors we should consider when modeling out the expected performance this year?

Reade Fahs -- Chief Executive Officer 

We continue to strive to be the best partner Walmart ever had. We've been working with them for 27 years. I've been their account executive for 16 years. I have managed that relationship personally for 16 years. We don't have any updates on that, but I'd say the relationship is very strong, very good place.

Zach Fadem -- Wells Fargo -- Analyst

Great. Thanks, Reade. Appreciate the time.

Reade Fahs -- Chief Executive Officer 

Thank you.

Operator

Thank you. Our next question will come from Matt Fassler with Goldman Sachs, your line is now open.

Matt Fassler -- Goldman Sachs -- Analyst

Thanks so much and good morning. First question relates to Eyeglass World -- the comp there held up rather well relative to trend. I'm curious whether you think the new ad campaign for that brand is starting to have material impact on sales for that brand. If you can talk also about when during the quarter that really started to take hold.

Reade Fahs -- Chief Executive Officer 

So, advertising in this category, strong advertising in this category tends to have a pretty immediate effect. You see it very quickly. That's a real plus. We started the ads in the beginning of the quarter and were encouraged pretty quickly by them. So, I think they played a role, but it wasn't yet in all markets. So, there's some expansion that happens into the control markets we have there.

Overall, I think that we've got a real strong leadership team at Eyeglass World and we have real strong products, real strong labs in the stores. We're about to add a real nice philanthropic component to it also. What we're looking for was that brick of strong advertising. I think I've said that here and there over time that I've never been quite pleased with the Eyeglass World advertising ever since we bought it years ago.

Now I'm pleased. I think we have a strong campaign and stores are rallying around it and excited by it and they have all sorts of fun contests going on involving Mr. World and getting pictures taken with Mr. World all sorts of places. You can just feel when there's a real nice spirit to a brand. The group at the end of last year, we had a store managers' conference where we introduced the Mr. World campaign to them. There's an excitement in the air at Eyeglass World. That's clear to us.

Jeff McAllister -- Chief Operating Officer

Reade, this is Jeff. I'd just say I think Jackie and the team with the new ad campaign of creating the world's happiest customers really has to be brought to light. There can't just be an ad without substance. I think they're creating real substance to demonstrate that we are, in fact, the best place for our customer's to actually shop and buy their eyewear. I think you can see that show up in the sales and the NPS and the overall performance. I couldn't be more delighted with the way that's showing up.

Matt Fassler -- Goldman Sachs -- Analyst

If I could ask a second question back to America's Best, so this is a brand that had been comping, on average, about 10% on an annual basis over the last four years. You're up against, to compare on the tax refund delay from a year ago. That being said, you cycled it with, I think, the lowest quarterly comp you've put out certainly in the past two years' plus. It sounds like 400 store days is less than a percentage point impact, assuming that's allocated evenly across the businesses.

Is there anything else going on in the America's Best ecosystem, either competitively, cycling, any accomplishments that might have helped to propel that business? The curve has been so consistent for so long. I just wanted to dig a little deeper and see if there's any reason why that comp couldn't make its way back. I know you're not guiding it to that level back to the trend that we'd seen for so long.

Reade Fahs -- Chief Executive Officer 

There's nothing competitively out there that is any different or raises concerns for us in that way. I think it was more the factors that we talked about, the extension of the peak season, the weather impact, the fact that you're looking at a Q4 that was positively influenced by the storms in Q3 last year spilling over, but it's still humming along.

Matt Fassler -- Goldman Sachs -- Analyst

Gotcha. And then one very quick follow on. I believe in the Q, there was some reference to vendor credits in the quarter. I just wonder if that was material to the point that it's worth quantifying.

Patrick Moore -- Chief Financial Officer

Actually, there are vendor credits and rebates that flow across the entire year and every quarter. It didn't look like something would normalize out. Pretty routine for us to hit certain marks at certain points of the year and receive some funds out of vendors.

Matt Fassler -- Goldman Sachs -- Analyst

Gotcha. Thank you so much, guys.

Operator

Thank you. Our next question will come from the line of Bob Drbul with Guggenheim Securities. Your line is now open.

Bob Drbul -- Guggenheim Securities -- Analyst

Good morning. Reade, happy birthday.

Reade Fahs -- Chief Executive Officer 

Thank you.

Bob Drbul -- Guggenheim Securities -- Analyst

The questions that I have -- on New York and California, as you've entered those states, can you just talk a little bit about the performance there and the percentage of openings in those areas. The second question I'd like to ask is around -- I know you talked about some of the wage pressure within the business, but can you specifically update us on the wage pressure or the ability to attract the optometrist, where that is, especially as it relates to the expansion program under way from new stores?

Reade Fahs -- Chief Executive Officer 

Sure. We are not commenting about specific market performance due to competitive reasons. I'll say for the markets you mentioned, I will point out that over 70% of them haven't been opened for even a year yet. So, there's not a lot to report there, but we're not commenting on specific markets because every market has its own competitive ecosystem.

Jeff McAllister -- Chief Operating Officer

I'll just comment about our optometrists. Again, we're delighted with our performance and the fact that we are able to attract retain our doctors. To do so, we have to be competitive in wages, but actually it goes beyond that. It has to be they feel the environment really supports their practice. We think we've really dialed that up to ensure that we are the best place for them to practice their entire career. So, I'm feeling optimistic about optometrists being attracted to National Vision.

Patrick Moore -- Chief Financial Officer

This is Patrick. I'll add a little more on the historic performance. As we've stated in the past, those stores take three to five years to ramp. Every market is a little different. Every store is a little different. We're very focused on getting those markets up to speed so they'll be contributing. We're obviously taking a share there and we're excited to be in those markets. We see a lot of our existing and potential customers in our new markets.

Bob Drbul -- Guggenheim Securities -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question will come from the line of Robby Ohmes with Bank of America Merrill Lynch. Your line is now open.

Robert Ohmes -- Bank of America Merrill Lynch -- Analyst

Thanks. Reade, happy birthday from me as well. I want to ask the question on the same stores sales. Can you remind us, as you are coming up against tougher comparisons how we should think about the drivers to comps maintaining this level as the comparisons get tougher?

Patrick Moore -- Chief Financial Officer

Hey, Robby, it's Patrick. I'll give you some insight there. We still -- our intent is to keep driving comps with traffic. This quarter, we have some traffic and a little bit of ticket, but it's down to the glass level absolutely driven by traffic. You're right, Q2 and Q4 are tougher comp quarters, but we have remarked that we've seen some flow in from Q1 into Q2. As I think about Q3, we're not planning for hurricanes or two hurricanes in Q3, so that will be easier. We have strong confidence in the guidance range of 3% to 5% and feel comfortable we can deliver that.

Robert Ohmes -- Bank of America Merrill Lynch -- Analyst

And then on the new Greater New York stores, was the weather impact enough that it's too early for to really know whether you're tracking above or below expectations on those stores?

Reade Fahs -- Chief Executive Officer 

We're not commenting on specific markets. As I said before, we're not doing that for competitive reasons. It's still a relatively small presence in New York anyway.

Patrick Moore -- Chief Financial Officer

It's very early.

Reade Fahs -- Chief Executive Officer 

It's very early in New York, right.

Robert Ohmes -- Bank of America Merrill Lynch -- Analyst

Got it.

Reade Fahs -- Chief Executive Officer 

If you look at the store count, a lot of Northern New Jersey is what we've been into so far.

Robert Ohmes -- Bank of America Merrill Lynch -- Analyst

Gotcha. Thanks, guys.

Operator

Thank you. Just as a reminder, ladies and gentlemen, if you would like to ask a question over the phone lines, press * and then 1 on your keypad. Our next one will come from the line of Simon Gutland with Morgan Stanley. Your line is now open.

Joshua Siber -- Morgan Stanley -- Analyst

Hey, it's Joshua Siber on for Simeon today. Question on the EGW versus the America's Best spread -- so, EGW comped ABC for the first time. How much would you attribute to advertising and are you seeing a sales pickup at EGW in a similar fashion they did once you rolled out the owl campaign?

Reade Fahs -- Chief Executive Officer 

I consider the advertising thing is certainly a factor there but it's not the only one. This works when you have your traffic drivers like advertising and managed care driving people internet of things the stores. When you've got the right store manager and district manager, making sure you've got the right things happening or when you've got the right product in the stores, I think we've got all three of those engines running in Eyeglass World. When it all comes together in that way, you feel like it might get results.

Joshua Siber -- Morgan Stanley -- Analyst

Okay. Is there a chance that you can -- go ahead.

Patrick Moore -- Chief Financial Officer

It's Patrick. I just wanted to add the comps that were referenced last year, I think they were 6.9 for AB -- 2017 was the year where we had essentially a two and a half-week period where there was this gap in sales. We had a tax refund delay. So, AB did that comp whether about nine and a half good weeks out of a twelve-week quarter. So, we can kind of look back and say it was really -- that probably understates the AAB performance in the quarter last year. So, we are looking at a three-year stack there that kind of normalizes getting close to profit, 30%.

Reade Fahs -- Chief Executive Officer 

To answer your question, Eyeglass World had a tougher or easier base periods -- Josh, sorry -- they did 3.9% in the first quarter of last year. So, it's a little lighter comparison versus America's best also.

Joshua Siber -- Morgan Stanley -- Analyst

Okay. And then unrelated, you mentioned eye exams help these legacy comps. Is the contribution from exams similar in the America's Best and Eyeglass World business?

Patrick Moore -- Chief Financial Officer

Ask that question one more time.

Joshua Siber -- Morgan Stanley -- Analyst

I'm just curious -- we're trying to break out the spread between eye exam comp growth and product comp growth.

Patrick Moore -- Chief Financial Officer

Right. It's the first site business transfer. In terms of legacy, that was a plus $1.2 million in revenue coming in and a little lesser amount of cost but that transfer over from the corporate other segment is skewing legacy.

Joshua Siber -- Morgan Stanley -- Analyst

Okay. Thank you.

Operator

Thank you. I'm showing no further questions at this time. I'd like to wish a very happy birthday to Mr. Reade Fahs, Chief Executive Officer, and hand the call back over to him for some closing comments and remarks.

Reade Fahs -- Chief Executive Officer 

Thank you, Brian. We want to thank you all for joining us today, for your interest in what you're doing. If you have a moment, we invite you to go online and watch our television ads for both America's Best and Eyeglass World. We've included a link on page 21 of your questions were quite cool and that none of them were in any way boring and we remain very excited about 2018 and look forward to talking to you later this summer about our second quarter results.

Operator

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program. You may all disconnect. Everybody have a wonderful day.

Duration: 50 minutes

Call participants:

David Mann -- Vice President of Investor Relations 

Reade Fahs -- Chief Executive Officer 

Patrick Moore -- Chief Financial Officer

Jeff McAllister -- Chief Operating Officer

Paul Lejuez -- Citi -- Managing Director

Dan Binder -- Jefferies -- Managing Director

Zach Fadem -- Wells Fargo -- Analyst

Matt Fassler -- Goldman Sachs -- Analyst

Bob Drbul -- Guggenheim Securities -- Analyst

Robert Ohmes -- Bank of America Merrill Lynch -- Analyst

Joshua Siber -- Morgan Stanley -- Analyst

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