Warby Parker Inc. began in 2010 offering prescription glasses for $95 and, despite sky high inflation and other changes over the past dozen years, the company continues to offer eyeglasses for less than $100.
“We launched selling prescription glasses for $95 and we have not changed this price point in the 12-plus years since launch, but over the years we have introduced many other products at different price points that have led to increasing average order value and improving customer economics over time,” said Dave Gilboa, co-founder and co-chief executive of the company on its most recent earnings call, according to a FactSet transcript.
“And as we have introduced these new price points, we have not seen them impact demand.”
Gilboa said that the average revenue per customer has increased $28 to $246 since 2020. The increase is attributed to the shopper’s addition of eye exams and contact lenses to their eyeglass purchase and the sale of progressive glasses, which start at $295 — the company’s “highest price point and highest product margin,” Gilboa said. Progressive glasses, which skew to a demographic ages 45 and older, will be a focus going forward.
“We’re particularly excited by the fact that today progressive purchases tend to skew more towards bricks and mortar, given the complex nature of the prescription and the older customer demographic,” said Neil Blumenthal, also a co-founder and co-CEO, on the call, according to the FactSet transcript.
“So as we scale our retail footprint and our stores return to full productivity, we expect to see compounding growth of this product.”
has 40 brick-and-mortar stores planned for 2022, which would bring the number of locations to 201. By the end of the year, the company’s goal is to have 154 stores providing eye exams.
The low price point attracts shoppers who probably can afford to spend more.
“Given our customer base generally skews more affluent, we did not detect an increase in sales last year because of the federal stimulus in March and are therefore not lapping a one-time bump,” Blumenthal said.
Warby Parker reported a wider-than-expected loss in the fourth quarter and revenue in line with the Street consensus. The company says the spread of the omicron variant had an impact during a period that is usually significant for the company.
“Because of FSA spending in vision insurance utilization at year-end, we typically see our highest sales days of the year between Christmas and New Year’s,” said Gilboa on the earnings call last week.
“This year omicron peaked during that same window in many of our biggest markets. As a result, we saw significantly lower retail foot traffic, staffing-related store closures and fewer eye exams.”
The company says it lost $5 million due to omicron in the fourth quarter, and $15 million in the first quarter as people stayed away from stores.
“The stock could be range bound near-term as risk factors around COVID variants and lower store traffic levels are digested,” wrote Cowen in a note.
“That said, Warby Parker’s active customer growth and implementation of new categories remain core positives to our investment thesis.”
Cowen rates Warby Parker stock outperform with a $38 price target.
Warby Parker stock began trading in September 2021 through a direct listing with a $40 reference price. Shares jumped 7.3% in Wednesday trading, but have slumped nearly 29% over the past three months, closing Tuesday at $31.51.
The benchmark S&P 500 index
is down nearly 5% for the last three months.