Warby Parker Revises Financial Outlook and Consolidates Costs Amidst Q2 Net Loss
Following Q2, Warby Parker perceives undeniable importance of physical stores.
Warby Parker, the direct-to-consumer eyewear retailer, announced a widened Q2 net loss of $32.2 million, a $21.9 million increase from the previous year, due predominantly to a 420 basis point surge in SG&A expenses, including labor costs in brick-and-mortar stores, corporate overhead, expenses associated with its initial public offering (IPO), and technology investments.
As a result, Warby Parker has adjusted its full-year net revenue expectations. The company now anticipates revenue growth of between 8% and 10%, which equates to a range of $584 million to $595 million, and an adjusted EBITDA margin of 3.8% to 4.4%. Previously, the company had predicted a revenue growth of 20% to 22%, with a projected revenue range of $650 million to $660 million, and an adjusted EBITDA margin of approximately 5.6% to 6.6%.
Despite the increased costs, Warby Parker intends to continue its store expansion plans, aiming to open 40 new stores this year. The company currently operates 175 stores in the US and three in Canada, having opened nine new stores in the second quarter. Notably, the recently announced layoffs will not impact store employees.
In light of its evolving status as a comprehensive vision care company, Warby Parker now offers eye exams at certain locations and has diversified into contact lenses, where revenue doubled during Q2. While this expansion appears to be yielding success in terms of customer acquisition, with an increase of 8.7% in active customers to 2.26 million, it has also contributed to a decline in the gross margin from 59.3% the previous year to 57.7%.
"We remain convinced that it is advantageous to open stores and that it constitutes a shrewd use of capital," said co-founder and co-CEO Neil Blumenthal to analysts during a recent presentation. Stores play a significant role in marketing and customer acquisition, particularly in the eyewear market, where trying on products is crucial for sales.
However, changes in consumer behavior, driven largely by inflation, may pose challenges. According to GlobalData Managing Director Neil Saunders, Warby Parker's operational losses are 3.6 times higher than last year, with net losses following a similar trajectory. Despite the short-term difficulties, Saunders asserts that "Warby Parker remains a disruptive force in the eyewear market," but notes the importance of balancing expansion with profitability in the current economic climate.
- Warby Parker, despite its Q2 net loss, plans to continue its expansion into the space of brick-and-mortar stores, targeting 40 new locations this year.
- The rise in labor costs, SG&A expenses, and technology investments have contributed to Warby Parker's widened Q2 net loss, leading the company to revise its full-year net revenue expectations.
- Warby Parker's evolving status as a comprehensive vision care company has seen an expansion into contact lenses and the offering of eye exams at certain locations, but this has caused a decline in the gross margin.
- Neil Blumenthal, co-founder and co-CEO of Warby Parker, believes that opening stores is a smart use of capital, as they play a significant role in marketing and customer acquisition, especially in the eyewear industry.
- Inflation has led to changes in consumer behavior, posing potential challenges for Warby Parker, with operational losses being 3.6 times higher than last year according to GlobalData Managing Director Neil Saunders.
- Despite the current difficulties, Neil Saunders acknowledges that Warby Parker remains a disruptive force in the eyewear market and highlights the need for a balance between expansion and profitability in the current economic climate.
