Updated Aug. 9, 4:27 p.m.
Warby Parker Inc. is settling into the retail rhythm, expanding with new stores and working to get its costs right as the business grows.
“Our stores are playing an increasingly important role in attracting new consumers to our brand and extending the reach and availability of our holistic vision offering,” said Neil Blumenthal, cofounder and co-chief executive officer, as the company reported narrower losses for the second-quarter results, better sales and a stronger outlook.
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“Equally important, our stores continue to generate strong margins and high returns on capital even as the optical industry has recently experienced demand headwinds,” he said. “We opened 13 new stores in the second quarter, remain on track to open 40 new stores this year, and believe we have the potential to reach at least 900 locations over time.” Warby ended the quarter with 217 stores.
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Net losses for the quarter ended June 30 narrowed to $15.9 million from $32.2 million a year earlier.
The improvement was attributed to lower selling, general and administrative expenses, which fell to 65.5 percent of revenue, down from 79.2 percent in the year-ago period. Those declines were driven by lower stock-based compensation and reduced marketing costs.
Adjusted earnings before interest, taxes, depreciation and amortization increased to $14.2 million from $6 million.
“We delivered another quarter of double-digit revenue growth and strong adjusted EBITDA margin expansion,” said Dave Gilboa, cofounder and co-CEO. “The work we’ve done realigning our expense structure is enabling us to balance improving profitability with reinvesting in the business to drive sustained market share gains long term.”
Revenues for the quarter advanced 11 percent to $166.1 million as the active customer count increased 1.2 percent to 2.3 million.
The momentum was enough for Warby Parker to nudge up its outlook for the full year.
The company is expecting annual revenues of $655 million to $664 million for growth of 9.5 percent to 11 percent. Its prior outlook called for growth of 8 to 10 percent.
Adjusted EBITDA is now expected to hit $52 million, instead of the $51.5 million previously projected.
After an early increase in the stock, shares of Warby Parker were down 3.5 percent to $13.89 on Wednesday.
As the company marches toward profitability it is undergoing a series of changes — from adding stores to expanding on its business with progressive lenses and on-site eye exams to adjusting its marketing.
Steve Miller, chief financial officer, told analysts on a conference call: “For the first quarter, e-commerce represented 36 percent of our overall business compared to 44 percent in 2022 and in line with our pre-pandemic channel mix. The decline in e-commerce revenue was in line with our expectations and driven by an intentional reduction in marketing spend by 35 percent year-over-year as we bring marketing spend as a percent of revenue back to pre-pandemic levels in the low teens.”
The mix is important for Warby Parker, which after getting its start online, has developed close connections between bricks and clicks.
Neil Saunders, managing director of GlobalData, noted in an analysis: “While we are satisfied with Warby Parker’s general trajectory and the company’s medium-term pathway to profitability, we remain concerned about active customer numbers. Here, the pace of expansion has been waning for over a year; and this quarter, Warby Parker only managed to eke out a very modest 1.2 percent increase. This is despite the fact [that] 39 new stores have been added over the past year, an uplift of 21.9 percent in the company’s footprint since last year. To be fair, a lot of the erosion is coming from a reduction in online customers, but stores should also act as a recruiting sergeant for all channels and be helping to generate a much higher rate of increase.”