Warby Parker saw sales grow at a faster pace in the third quarter, but the eyewear retailer has downgraded its full-year outlook amid softening demand.
The company’s net revenue for the quarter ended surged 15.2 per cent to $29.2 million, accelerating from a 13.9 per cent increase in the second quarter.
The growth was delivered amid 15 net store openings and 9.3 per cent increase in active customers.
Gross margin edged down from 54.5 per cent to 54.1 per cent, primarily driven by the impact of tariffs.
On the bottom line, the company swung to a net income of $5.9 million from a loss of $4 million in the year-ago period.
The retailer has lowered its guidance for the full year, expecting net revenue to grow 13 per cent to between $871 million and $874 million, compared to the prior outlook of a 14-15 per cent increase.
Softening demand
While Warby Parker delivered a healthy sales uplift during the quarter, expectations were running high because of the continued new store openings, said GlobalData MD Neil Saunders.
The market has punished the eyewear retailer for missing on its revenue guidance and for easing down future sales growth projections, he added.
“It is also clear that as the peak of summer faded, demand in the overall eyewear market has softened a little as consumers have cut back on buying new frames. Most of this is attributable to consumer caution.
“In theory, Warby Parker should be a beneficiary of this as many of its frames are reasonably priced and represent good value for money. However, this is somewhat offset by the fact that Warby Parker has a lot of fashion-based customers for whom purchases are non-essential,” Saunders said.
The analyst noted that the return to profit on the bottom line, despite tariffs weighing down margin, was quite an achievement for the company.
Although the business model has proved itself, what Warby Parker needs to do now is show it can continue to take market share and generate punchy revenue numbers, Saunders continued.
“New store openings, of which there should be 45 across this fiscal year, will help with this. So too will the continued push into areas like eye testing and contact lens subscriptions. But in a softer market, reaching the expectations of investors may require a little extra effort and some more imaginative thinking,” he said.
Recent initiatives, such as the opening of shops in Target and the move into AI-optimized glasses through partnerships with Google and Samsung, are examples of creative avenues for growth, he added.
Saunder said that the company’s outlook for the year is reasonable, as the softness that materialized this quarter will persist.
“But this is mostly down to external factors. Once these fade, we still see Warby Parker as a winner in the eyecare space,” he said.
