Warby Parker, the popular eyewear retailer, experienced a significant decline in its stock following unexpected quarterly results. The company reported a surprise fourth-quarter loss, causing shares to drop by 8.6% in premarket trading. This decline came after the stock had already seen an 18% increase earlier in the month, including a 7.7% jump the day before.
The company’s net losses for the quarter narrowed compared to the same period last year, but still fell short of expectations. The adjusted net loss was $1.11 million, while analysts had predicted earnings per share of 1 cent. The main factor contributing to this loss was a continuous decrease in gross margin, which declined from 55.1% to 53.8%. One of the key reasons for this decline was the increased sales of contact lenses, which have lower profit margins compared to glasses. Additionally, factors such as increased doctor salaries, an increase in the number of stores offering eye exams, and higher store-occupancy costs all contributed to the decrease in gross margin.
This quarterly report highlights a concerning trend for Warby Parker, as the company has experienced year-over-year declines in gross margin since going public in September 2021. However, it’s not all bad news for the company. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) did see a slight increase from $8.6 million to $9.4 million. Although it missed the FactSet consensus of $9.8 million, this rise indicates some underlying profitability for the startup.
In terms of revenue, Warby Parker saw growth of 10.5% to $161.9 million, surpassing the FactSet consensus of $160.9 million. This growth can be attributed to a 2.5% increase in active customers, reaching 2.33 million, and a 9.3% increase in average revenue per customer, which now stands at $287.
Looking ahead to 2024, the company expects revenue in the range of $748 million to $758 million. This forecast aligns with the current FactSet consensus of $751.2 million. Despite the recent stock decline, Warby Parker has seen a significant rally of 39% over the past three months, outperforming the S&P 500, which has gained 11.5%.
The unexpected quarterly loss and continuous decrease in gross margin may raise concerns among investors and analysts regarding Warby Parker’s long-term profitability. However, the company’s ability to grow its customer base and increase average revenue per customer shows promise for its future performance. As the eyewear industry continues to evolve, it will be crucial for Warby Parker to address the factors impacting its gross margin and find ways to maintain profitability in a competitive market.
