Dive Brief:
- Warby Parker’s net revenue during the first quarter increased 12.2% year over year to $172 million, according to a company press release Tuesday. The direct-to-consumer eyewear company reported its net loss narrowed to $10.8 million compared to $34 million the year before.
- The company’s gross margin decreased year over year from 58.5% to 55.1%. The decline was driven in part by store count growth and increased salary and benefit costs for optometrists. The average revenue per customer jumped by 8.4% to $270 and active customers increased by 2.5% to 2.29 million.
- For the full year, Warby Parker expects net revenue to increase by 8% to 10% compared to 2022. The company plans to open 40 new stores on a gross basis with a total projected store count of 240. Warby Parker opened six new stores during Q1 and closed two, co-founder and co-CEO Neil Blumenthal said on a call with analysts Tuesday.
Dive Insight:
While dealing with declining trends across the optical industry, Warby Parker started the fiscal year beating expectations.
“We achieved double digit revenue growth, ahead of expectations and well above the current industry forecasted growth rate,” Warby Parker co-founder and co-CEO Dave Gilboa said in a statement. “Our teams are doing an excellent job of capturing demand in the current environment through our compelling value proposition, expanding portfolio of products and services, and delivering world class customer service.”
During the first quarter, the company’s selling, general and administrative expenses were 62.3% of revenue compared to 80.5% the year before. The drop was partially caused by a decrease in marketing costs, and Blumenthal told analysts that the company is in the final stages of realigning its marketing spend with pre-pandemic levels.
Store revenue increased about 28% while e-commerce revenue declined by 8% year over year during Q1, Gilboa said on the call. The e-commerce decline was in line with the company’s expectations as a result of marketing spend decreasing by 35%. The company’s revenue from online channels is expected to become comparably positive during the second half of the fiscal year.
Moving more toward holistic vision care, the company has been focused on increasing its number of stores offering eye exam services, as well as increasing its penetration of progressive lenses, which are its highest margin product according to Gilboa. Up from 20.8% last year, progressives represented 22.9% of all prescription glasses sold in Q1. Contact lenses also increased slightly from 7% to 7.7% of the business mix year over year.
Warby Parker’s active customer growth of 2.5% during Q1 is one of its worst reported rates, according GlobalData Managing Director Neil Saunders. Stores are also not delivering the same returns for the brand as they used to, Saunders added in emailed comments, but overall the quarter has kicked off the new fiscal year with some momentum.
“We note that overall marketing expenses have been reduced, which is necessary to pave a path to profitability, but we wonder if the cuts have been too blunt rather than selective and surgical,” Saunders said. “The roll out of newer services, including contact lens subscriptions and eye examinations remains on track. We believe these are critical for rounding out the proposition and bolstering revenue, even if they do come with slightly lower margins. However, again, we think more noise needs to be made around these services as awareness remains weaker than it should be.”
