Eyewear retailer Warby Parker reported another quarter of sales growth and ended the fiscal year on a strong note, but the top-line performance might have started to mature.
The company’s net revenue rose 11.2 per cent to $212 million in the quarter ended December 31, a slowdown from the 15.2 per cent growth in the third quarter.
GlobalData MD Neil Saunders also noted that the final quarter was the weakest of the fiscal year. However, it did come off the back of a very strong performance in the year-ago period.
“It also remains relatively robust and rounds off what can generally be considered a good year for the group, especially in terms of expansion,” he added.
The more modest improvement in Q4, as well as the predicted revenue increase of 10-12 per cent across this year, reflects a pattern of slowing growth and productivity gains, according to Saunders.
“Some of this is to be expected as the business matures, but we also believe that newer stores are not adding to sales at the levels they once did. This is likely because the time taken to reach full potential is longer than it used to be, and because the consumer economy is not as robust as it once was,” he said.
For the full FY25, revenue increased 13 per cent to $871.9 million, supported by 47 new stores, higher customer numbers, and a 5.7 per cent lift in revenue per customer.
The company plans to open another 50 locations this fiscal year. Saunders said, “This is not wrong as Warby Parker has relevance and a strong point of differentiation from other physical eyewear retailers, but it does mean the return on investment may take longer to come through.”
On the bottom line, the company also returned to the black for the full year, posting $1.6 million in profit, compared with a loss of around $20.4 million in the prior year.
However, Saunders noted that margin remains “wafer thin”, and that the company remains in the red by $5.3 million on the operation front.
While the full year was profitable, the final quarter saw a loss of almost $6 million, partly due to the impact of tariffs on imports and higher shipping costs. According to the analyst, the company tried to offset this with some selective price increases, but the soft demand environment does not allow for costs to be passed across in full.
“In our view, this could produce something of an interruption in the path to profitability across the new fiscal year,” he added.
Looking more broadly, Saunders said the appointment of Adrian Mitchell as CFO would bring deep financial experience that is necessary as Warby Parker becomes a bigger business.
“Overall, we remain positive about Warby Parker,” he said. “But there is no doubt that the market is more challenging and sales gains are becoming more difficult to come by. That means tighter internal operations and financial discipline will become more critical.”
