Dive Brief:
- Warby Parker’s third-quarter net revenue increased 14.2% year over year to $169.8 million, according to a company press release Wednesday. The direct-to-consumer vision company’s net loss improved about 27% to $17.4 million and gross margin decreased from 56.7% to 54.6%, driven in part by growth in the lower gross margins category of contact lenses.
- Warby Parker opened 11 new stores during the quarter, ending the period with 227 stores, per the release. E-commerce revenue was up 3% year over year, co-founder and co-CEO Neil Blumenthal said on a call with analysts Wednesday. Active customers increased 1.8% to 2.3 million and the average revenue per customer jumped 10% to $284.
- For the upcoming fourth quarter, co-CEO and co-founder Dave Gilboa told analysts that Warby Parker expects net revenue of $158 million to $161 million, a year-over-year increase of about 8% to 10%. The company raised its full-year 2023 net revenue outlook from the previously projected $655 million to $664 million to a revised range between $666 million and $669 million.
Dive Insight:
Ahead of the holiday season, Warby Parker’s outlook for the full year stayed positive.
“As we head into the busiest time of year, our team remains laser focused on delivering remarkable experiences and value for our customers,” Gilboa said in a statement. “We are confident in our strategic direction and continue to believe we are in the early innings of delivering long-term, profitable growth.”
In the long term, executives on the call said that Warby Parker is still on track to open 40 stores for the year and has the potential to open at least 900 stores in the U.S. Warby Parker executives also noted that the company doesn’t expect e-commerce’s recovery to be linear and there may be higher or lower growth in the near term, including in the upcoming quarter.
While Warby Parker’s more modest active customer growth and lengthened eyewear purchase cycles among consumers present dilemmas, the brand’s latest quarter shows momentum, according to some analysts.
“After a long run of more modest growth, Warby Parker has picked up the pace in the third quarter,” GlobalData Managing Director Neil Saunders said in emailed comments. “Although Warby Parker still remains a way off achieving profitability at operating and net income levels, this is understandable as it is investing in, and growing, the business. We can still see the pathway to profitability, just as we believe Warby Parker has a distinct and differentiated proposition which is relevant to consumers. It is one of the few DTC brands that we think has longevity and a strong business model.”
When asked about the mixed consumer picture and its impact on promotions, Blumenthal reiterated the brand’s existing emphasis on offering value to customers.
“On the consumer front and promotions in general, we've tried to run a business to always provide exceptional value,” Blumenthal said. “And given that sort of exceptional value, we haven't felt the need to offer tons of promotions. So you shouldn't expect to see us introducing promotions during the holiday season.”
All 11 of the brand’s new stores during Q3 offer eye exam capabilities, bringing the total number of locations with that offering to 183 or 81% of its total store fleet, Gilboa told analysts. Warby Parker is testing video-assisted exams in a small number of stores that provide comprehensive eye health evaluations using live doctors who remotely engage with patients in exam suites.
As Warby Parker has worked to introduce more complex eyewear at higher price points, the company has seen little price resistance from its customers.
“You'll continue to see us invest in a broader frame assortment,” Blumenthal added. “So while we now have frames at $145 or starting at $175 or $195, they would be sold for another location for several hundreds if not over $1,000. And that's just core to our ethos and our pricing strategy is to always deliver exceptional value.”
