Warby Parker Grabs Eyeballs on Q1 Losses

Warby Parker Inc. (NYSE: WRBY) caught investors’ attention yesterday after it delivered weaker-than-expected results for the first quarter of 2022. Its bottom line experienced losses, which were much lower than the consensus estimate of a break-even level. Also, revenues missed the consensus estimate by 0.6%.

Shares of this $1.9-billion eyewear products provider declined 5.3% to close at $16.51 on Monday. The stock is down an additional 0.1% today.

Financial Highlights

In the quarter, Warby Parker reported an adjusted loss of $0.30 per share, worse than the consensus estimate of $0.00 per share and the year-ago tally of $0.03 loss per share.

Revenues in the quarter totaled $153.2 million, down from the consensus estimate of $154.1 million but 10.3% above the year-ago tally of $139 million. Active customers in the quarter grew 18% year-over-year, and the average revenue per customer increased 11.2%.

Adjusted cost of goods sold increased 14.8% year-over-year, and adjusted gross profits grew by 7.3%. Selling, general and administrative expenses (adjusted) expanded 21.5% in the quarter.

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $0.77 million, down from $9.3 million in the year-ago quarter.

During the quarter, the company unveiled four new collections of eyewear products, opened eight retail stores (with a total coming in at 169 at the end of the quarter), and worked on strengthening its supply chain.

Balance Sheet and Cash Flow

Exiting the first quarter, Warby Parker had cash and cash equivalents of $230.3 million, down 10.2% sequentially. The company’s total liabilities of $263.8 million represented growth of 70.6% from the previous quarter.

The company used $10.3 million for its operating activities and expended $16.1 million on purchasing property and equipment in the quarter.

Projections

For 2022, Warby Parker maintained its previous projections of $650-$660 million for revenues, 5.6%-6.6% for adjusted EBITDA margin, and 40 new stores opening (with a total of 201 by year-end).

The company noted that the top-line projection represents year-over-year growth of 20%-22%, including the adverse impact of three percentage points from the Omicron variant.

Management Commentary

Warby Parker’s co-founder and co-CEO, Neil Blumenthal, said, “We believe our omnichannel business model, compelling value proposition, and strong consumer brand uniquely position us to capture market share for years to come in both good and turbulent environments.”

Wall Street’s Take

Following the earnings release, an analyst of CFRA reiterated a Buy rating on WRBY while lowering the price target to $25 (52.2% upside potential) from $30.

Another analyst, Mark Mahaney of Evercore ISI maintained a Hold rating on the company and lowered the price target to $23 (40% upside potential) from $39.

Overall, the Street is cautiously optimistic on WRBY and has a Moderate Buy consensus rating based on six Buys and four Holds. The average Warby Parker price forecast of $27.4 suggests 66.8% upside potential from current levels.

Over the past year, shares of Warby Parker have plunged 69.7%.

Warby Parker’s Website Traffic

Per the TipRanks Traffic tool, the footfall on the company’s website (warbyparker.com) decreased 2.66% year-over-year in April and Q2-to-date while increasing 13.35% since the beginning of 2022.

In the first quarter of 2022, the tool reveals that the visits to the company’s website grew 15.6% from the previous quarter and 19.3% from the year-ago quarter.

Conclusion

New product launches, increasing active customers, and a rise in revenue per customer are indicative of Warby Parker’s efforts to increase its market size and growing customer preferences for its products. However, high costs and expenses, which led to net losses, are worrying.

Discover new investment ideas with data you can trust.

Read full Disclaimer & Disclosure