Wall Street Reacts to Warby Parker’s Narrowed Losses
Warby Parker is inching closer to profitability.
The direct-to-consumer eyewear brand revealed quarterly earnings Thursday before the market opened, improving on top-line sales and narrowing losses. The company also updated its full-year outlook.
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Shares of Warby Parker surged on Wall Street by more than 22 percent at the start of Thursday’s session, as a result, ultimately closing up 14.89 percent to $15.20 apiece.
“Despite a challenging operational environment, our brand, value proposition and omnichannel model continue to resonate with consumers and drive incremental demand,” Neil Blumenthal, cofounder and co-chief executive officer, said in a statement. “Warby Parker offers customers more options and better value than ever before, and, in turn, customers are spending more with us. As we approach the holiday season, we aim to build on our loyal customer base, deliver significant value to all our stakeholders and execute on our vision for reshaping the industry.”
Dave Gilboa, Warby’s other cofounder and co-CEO, added: “Thanks to our team’s hard work and execution, Warby Parker delivered solid results in a quarter where inflationary concerns and weakening consumer demand continue to impact our industry. Our team took important steps to advance our mission and strategic growth initiatives, all while maintaining our focus on exceeding customer expectations and making it easier to choose Warby Parker. This quarter, we meaningfully invested in our eye exam business, expanded our contacts business and opened 13 new stores, bringing our total store count to 190.”
Total company revenues for the three-month period ending Sept. 30 increased 8.3 percent to nearly $149 million, up from roughly $137 million the same time last year. Tailwinds included Warby’s contact lens business, where revenues rose nearly 50 percent, year-over-year.
“In contact [lens], customers are some of our highest value customers, given the replenishment nature of contacts and the propensity of these customers to go on to purchase glasses,” Gilboa told analysts on Thursday morning’s conference call.
In addition, Warby continues to invest in its eye exam business, with plans to expand the service to 150 stores, up from 139 right now, by the end of the year while hiring more optometrists.
Consumers’ awareness also continues to expand. The company also said its number of active customers — or Warby shoppers who have made at least one purchase in the last 12 months — increased by 110,000, with the average customer spending about 6.8 percent more.
But analysts are also increasingly getting on board. In a note, Zachary Warring, an equity analyst at CFRA Research, maintained the firm’s “buy” rating and 12-month price target of $21 a share on Warby’s stock.
“We continue to like management’s long-term strategy of a direct-to-consumer focus with sustainable growth while prioritizing profitability and believe shares have significant upside over the next two to three years,” Warring wrote.
Warby Parker narrowed its losses to $23.8 million, compared with losses of more than $91 million during 2021’s third quarter.
“We continue to take a disciplined approach to actively managing costs while prudently investing in our business and our third-quarter results demonstrate those efforts,” said Warby’s chief financial officer Steve Miller. “We are pleased to deliver net revenue above our revised outlook, despite the macroeconomic headwinds that continue to pressure the market. As we enter our final quarter of the fiscal year, we believe Warby Parker is well positioned to grow market share, achieve financial goals and deliver value to shareholders.”
The firm added in its financial documents that the reduced losses can be mainly attributed to lower selling, general and administrative expenses — by more than $63 million, year-over-year — thanks to lower charitable stock donations to the Warby Parker Foundation, as well as payroll taxes and professional costs.
In August, the retailer laid off 15 percent of its corporate workforce last quarter, as many companies were just beginning to implement staff reductions to curb costs. Recent layoffs have been heavily concentrated in tech, including the likes of Facebook’s Meta and Twitter, which is now owned by Elon Musk.
Warby Parker is now expecting total company revenues for the full 2022 fiscal year to grow 9.1 percent to 10.2 percent, or between $590 million and $596 million, compared with 2021.
“While we are encouraged with our results this quarter, we’re maintaining a cautious view of the near term,” Blumenthal said on the call. “Industry-wide demand softness driven by lingering pandemic effects, inflation and shifts in how consumers are spending their money and time continue to disrupt the normally steady and predictable shopping behavior in our category.”
The firm ended the quarter with $198 million in cash and cash equivalents, slightly down compared with $256 million last year. The retailer also ended the quarter with 190 brick-and-mortar stores and reaffirmed its plans to open roughly 200 stores by the end of 2022.
“Despite continuing to operate in an environment with lower retail traffic, our stores are generating $2.1 million in revenue on average on an annualized basis,” Gilboa said. He added that the new stores “on average remain on track to pay back within our target of 20 months.”
Broader picture, Blumenthal added that: “In general, what we’ve observed market-wide is that online glasses sales have been sort of negatively impacted more than sort of bricks and mortar from an industry-wide perspective.”
Warby Parker, which was founded online in 2010 and went public in September 2021, quickly rose to fame for its affordable eyewear and direct-to-consumer model.
Shares of Warby Parker are down approximately 74 percent, year-over-year.
