Warby Parker's Expansion Plans and Positive Market Outlook
2023-07-30
During the earnings call meeting, Warby Parker discussed its plans to expand its eye exam capabilities within its stores and the positive impact it would have on the business. The management team emphasized their ability to attract and retain talent, as well as their efforts to retrofit existing stores and build new ones with eye exam facilities. They also highlighted the potential increase in gross margin due to the offering of eye exams, which would lead to higher sales of higher-margin products.
Warby Parker's market outlook was discussed and appeared positive based on the company's strong performance and growth trajectory. Despite facing demand pressures in the optical industry, the company managed to exceed revenue expectations and accelerate growth in the first quarter of 2023. This was achieved through a focus on customer experience, product innovation, and store expansion. By optimizing their corporate cost structure and marketing spend, Warby Parker improved their adjusted EBITDA margins and gained market share. The opening of new stores, including in new markets, further indicated their expansion efforts. Overall, Warby Parker's solid performance suggested a favorable market outlook for the company.
The company's key drivers of the business were top-line growth, adjusted EBITDA margin improvement, cost reductions, marketing spend, and insurance initiatives. They planned to introduce new features to improve customer access to benefits, maintain a balance between growth and profitability, monitor expenses, and reinvest savings into the business for long-term growth.
The competitive landscape in the eyewear market was evolving, with Warby Parker experiencing growth in their retail channel, with retail revenue increasing by 28% year over year. However, their e-commerce channel saw a decline of 8%. Despite this decline, the company believed that their performance was strong compared to the overall e-commerce market and other online glasses sellers. The eyewear market, especially the online segment, had seen a contraction in sales and units. The company believed that they continued to outperform in both the retail and e-commerce channels. They had introduced higher price point frames and lens options, which resulted in increased sales. Overall, the company was confident in their full-year gross margin guidance.
The most important Key Performance Indicators (KPIs) discussed in the meeting were the adjusted EBITDA margin, top-line growth, and managed vision care integrations. The company aimed to improve its adjusted EBITDA margin by adding 100 to 200 basis points every year, with a target margin of 7.9%. They also planned to reaccelerate their top-line growth to reach a 20% growth level and generate the majority of their adjusted EBITDA in the first half of the year. Additionally, they were implementing initiatives to grow their managed vision care direct integrations.
The company's outlook for the year remained positive, as they maintained their full-year guidance. They expected net revenue growth of approximately 8% to 10%, with a revenue range of $645 million to $660 million. They also anticipated an adjusted EBITDA margin of approximately 7.9%, equivalent to adjusted EBITDA of approximately $51.5 million. The company planned to open 40 new stores, bringing their total store count to approximately 240 by year-end.
For the second quarter, the company expected net revenue of $160 million to $162.5 million, representing a growth of approximately 7% to 9%. They also anticipated an adjusted EBITDA of $11 million to $12.5 million.
The company's progress on strategic initiatives included anticipating generating the majority of its adjusted EBITDA in the first half of the year, aiming to be profitable every quarter, and achieving adjusted EBITDA margins of 7.9%. They also aimed to reaccelerate top-line growth to reach a 20% growth level, although the timeframe for this was uncertain. Additionally, the company was implementing insurance initiatives to expand its managed vision care direct integrations and enable broader usage of insurance benefits. These initiatives were expected to attract new customers and provide more value.
During the earnings call meeting, financial analysts from Piper Sandler, Goldman Sachs, Robert W. Baird and Company, and Evercore ISI participated. Their presence indicated the interest and importance of the company's financial performance and prospects. The active participation of analysts from prominent firms in the company's recent call suggested that the company's financial performance and future outlook were of significant interest to the investment community.