Dive Brief:

• Warby Parker narrowed its losses in the third quarter, reporting net loss improved 73.8% year over year to $23.8 million, while operating loss fell 74.3% to $23.7 million. The net loss improvement was primarily due to a decrease in SG&A expenses from the prior year related to its direct listing. On a two-year basis, both net loss and operating loss narrowed by 42.7%.
• The DTC eyewear brand reported third quarter revenues increased 8.3% from the year-ago period to $148.8 million, according to a company press release.
• From the third quarter last year, Warby Parker grew its active customer base by 5.1% to 2.26 million. The brand’s customer base was essentially flat compared to the prior quarter this year.

Dive Insight:

While Warby Parker’s revenue was nearly $3 million above the company’s revised guidance, according to co-founder and co-CEO Neil Blumenthal, growth at the brand appears to be slowing.

The company’s 8.3% revenue growth in Q3 comes off the back of 32% revenue growth in the year-ago period. And customer acquisition appears to be slowing, increasing by 5.1% this year, compared to 23% growth in Q3 2021.

Nevertheless, the brand on Thursday raised its 2022 outlook. Warby Parker now expects revenue for the year to be between $590 million and $596 million, an increase of 9.1% to 10.2% year over year. The company expects adjusted EBITDA to be between $25 million and $27 million and adjusted EBITDA margin of 4.2% to 4.5%. While this is an increase from its revised guidance provided in August, it comes in below its outlook issued in May when it expected revenue to be between $650 million to $660 million and adjusted EBITDA margin between 5.6% and 6.6%.

The company — which opened 13 stores in the third quarter, pushing its total to 190 — maintained its outlook of opening 40 new stores this year.

While Warby Parker continues to post sales gains and is trimming its losses, the slowdown in growth could be a troubling sign as consumers pull back on spending and seek out less expensive alternatives in the face of inflation.

“Our main concern is that despite continued expansion, prevailing conditions could further slow growth even as prior year comparatives become easier,” GlobalData Managing Director Neil Saunders said in emailed comments. “Although Warby Parker largely operates in a more essential category, it is more driven by fashion and impulse buying than many other optical retailers.”

To help offset this, the brand offers eye exams at several of its locations and has expanded into adjacent categories like contact lenses. Warby Parker’s contacts business grew 50% year over year and now represents 7% of the company’s business, according to Blumenthal.

“Overall, we still believe there is a place for Warby Parker and that its business model has several strengths over traditional optical players,” Saunders said. “However, with expansion providing a lower return on investment there is now more of a challenging balancing act between growing the top line and enduring that it quickly moves towards profitability.”