Five years ago, National Vision was a company without a clear future.

The Lawrenceville-based optical firm — which had grown into a national powerhouse in little more than a decade by operating its outlets in Wal-Mart stores throughout the country — was bankrupt, saddled with underperforming stores, and drowning in more than $100 million in high-interest debt.

KIMBERLY SMITH/Staff (ENLARGE)
National Vision CEO Reade Fahs.
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But being on the brink of destruction can be a potent motivator.

The company downsized — selling three chains it bought during the good times of the late 1990s. It hired a new management team to concentrate on more efficient operations. And it restructured deals with suppliers and reduced marketing to lower costs.

The payoff: The company's net earnings jumped from a loss of 77 cents per share in 2003 to $2.21 per share in 2004. Same-store sales were up 6.5 percent in 2004 over the previous year.

"The stock was about 70 cents a share when I came here in April of 2002," Reade Fahs, the company's president and chief executive officer, said recently from National Vision's offices in a 66,000-square-foot renovated Wal-Mart store. "We closed at the end of last year at $7.45."

This is especially pleasing to Fahs because Wal-Mart, home to the majority of National Vision's 411 outlets and about 80 percent of its sales, is not renewing National Vision's leases as they expire.

National Vision, which also operates stores on military bases and at retailer Fred Meyer, had 400 Wal-Mart locations in 2001. That number dropped to 304 last year and is projected to be 132 by 2009.

In fact, Wal-Mart has set up its own vision centers and is fast becoming one of National Vision's biggest competitors. Other rivals are market leaders LensCrafters, Pearle and NuVision, according to Fahs.

"While we were building our 400, they [Wal-Mart] were building their 400," Fahs said. "When they got to 400 they didn't stop, so they have about 2,100 stores themselves."

National Vision is not widely followed by Wall Street analysts, but Ken Bernhardt, chairman of the marketing department at Georgia State University, has kept an eye on the company.

Five years ago, National Vision was struggling because it bit off more than it could chew and faced the monumental challenge of its dwindling numbers at Wal-Mart, Bernhardt said.

Today it is "a good example of a company that encountered some hurdles, changed their business model and over time were able to execute a strategy to save the company," he said.

While the climb back from the brink has been successful, it hasn't been without bumps.

The company's profit dropped about 10 percent in the first quarter of 2005. Net income was $2.8 million on earnings of 50 cents a share. That compared with first-quarter net income of $3.1 million and earnings of 56 cents a share in 2004.

The company blamed the shortfall on income taxes of $1.8 million, a dramatic increase over the $135,000 assessed during the same quarter in 2004.

"We are going to have a higher tax provision throughout the rest of this year," said Chief Financial Officer Paul A. Criscillis Jr. "We are building up a deferred tax liability."

But that hasn't dampened Fahs' outlook for the future. National Vision's sales outpace competitors, he said.

The company's debt was $120 million in 2001, a year after filing Chapter 11. It stands at $67 million today, Fahs said.

Fahs doesn't just want to see National Vision regain its former stature. He wants to surpass it.

The company was founded in 1990 by Edward Weiner, an ophthalmic display provider for Wal-Mart. The retail behemoth was unhappy with an eyewear company it considered partnering with at the time, and Weiner suggested he could do the job.

Success came quickly. Then known as National Vision Associates, the company, which started with six stores, went public in 1992. By the end of the decade it had purchased three free-standing chains — Midwest Vision, Frame-n-Lens and New West Eyeworks.

"It was a move to not be so dependent on Wal-Mart," Fahs said. "Those chains didn't work well. They acquired a lot of debt."

Sales slipped and National Vision — then known as Vista Eyecare — was soon seeking Chapter 11 bankruptcy protection. It emerged in May 2001.

Today, the company's goal is to become the third-largest optical retailer within 10 years, Fahs said. Currently the company is No. 5.

It has hired Atlanta-based investment firm TM Capital Corp. to look at strategic alternatives, which might include buying another chain. Fahs declined to say whether there was interest in merging with one of the company's competitors.

"We have said to them, 'We'd like to explore a lot of other alternatives,' " Fahs said. "Maybe we recapitalize our debt, maybe we acquire things, maybe there are some other things."

National Vision is also growing its business on military bases and is opening stores called Vision Center II down the street from Wal-Mart stores where it previously had locations. Eight have opened so far, with an additional 10 projected by the end of the year.

"We take the store team, the doctor, his records, the phone number and move down the street," Fahs said of Vision Center II. "I believe in 'co-opertition.' "