Revenue: $223.8 million, up 11.9% year over year. Adjusted EBITDA Margin: 13.1%, marking a 190 basis points expansion year over year. Net Income: Achieved first quarter of positive GAAP net income as a public company. Active Customers: 2.57 million, representing 8.7% year over year growth. Average Revenue per Customer: $310, up 4.8% year over year. Store Openings: 11 new stores in Q1, totaling 287 stores. Gross Margin: Adjusted gross margin at 56.4%, slightly down from 56.9% in the prior year. Free Cash Flow: $13.2 million generated in Q1 2025. Cash Position: Ended the quarter with $265 million in cash. Contact Lens Revenue: Grew 25.1% year over year. Eye Care Revenue: Grew approximately 40% year over year. Retail Revenue: Increased 14.8% year over year. E-commerce Revenue: Increased 5.5% year over year. Guidance for 2025: Net revenue between $869 million and $886 million, adjusted EBITDA of $91 million to $97 million.

Warning! GuruFocus has detected 4 Warning Signs with WRBY.

Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Warby Parker Inc (NYSE:WRBY) reported a 12% year-over-year revenue growth, achieving its first quarter of positive GAAP net income as a public company. The company delivered an adjusted EBITDA margin of 13.1%, marking a nearly 200 basis points expansion from the previous year. Warby Parker Inc (NYSE:WRBY) experienced seven consecutive quarters of accelerating active customer growth, with a focus on customer retention and high-value repeat purchasing. The company successfully launched seven new collections, including its first rimless collection, and introduced a premium light-responsive lens that exceeded expectations. Warby Parker Inc (NYSE:WRBY) opened more stores in Q1 than in any prior first quarter, with plans to open 45 new stores in 2025, including shop-in-shops with Target.

Negative Points

The company revised its revenue growth outlook for 2025 from 14%-16% to 13%-15%, citing a more conservative approach due to macroeconomic uncertainties. Warby Parker Inc (NYSE:WRBY) faces potential gross margin impacts of 200 to 300 basis points for the full year 2025 due to increased tariffs. The company is experiencing dynamic consumer behavior and potential elongation in the purchase cycle due to economic volatility and low consumer confidence. Despite positive early signs, Warby Parker Inc (NYSE:WRBY) remains underpenetrated in the insurance customer segment compared to the rest of the industry. The company anticipates a modest reduction in store productivity and a low to mid-single-digit growth in the e-commerce channel for the remainder of the year.

Story Continues

Q & A Highlights

Q: Can you provide more color on the change in your revenue outlook for the year and what's driving the slight downward revision? A: David Gilboa, Co-CEO, explained that the company is taking a more cautious approach due to high volatility in news cycles and financial markets, which affects consumer sentiment and confidence. Steven Miller, CFO, added that the guidance was adjusted from 14%-16% growth to 13%-15% to reflect a more conservative outlook given the uncertain macro environment.

Q: How are tariffs impacting your gross margin and EBITDA margin, and what is your outlook beyond 2025? A: Steven Miller, CFO, stated that the company expects a similar pattern of EBITDA margins as last year, with the highest in Q1 and lowest in Q4. The company is confident in maintaining its long-term adjusted margin improvement of 100 to 200 basis points annually, despite tariff impacts. They plan to mitigate tariff effects through strategic vendor shifts, selective price increases, and disciplined expense management.

Q: Are you seeing volatility in customer traffic and consumer confidence, and how is e-commerce performing? A: Neil Blumenthal, Co-CEO, noted pockets of volatility due to weather and announcements from Washington but emphasized that Warby Parker benefits from market disruptions due to its value proposition. David Gilboa, Co-CEO, highlighted that e-commerce saw its highest quarterly growth since 2021, driven by digital capabilities and AI-driven recommendations.

Q: What are your thoughts on the Target partnership and its impact on the business model? A: Neil Blumenthal, Co-CEO, expressed excitement about the Target partnership, noting that the initial cohort of five stores will help them learn and grow. The stores will be staffed with Warby employees and are expected to complement standalone store growth, expanding access to a broader set of consumers.

Q: How are you managing marketing spend efficiency, and what impact will it have on the bottom line? A: David Gilboa, Co-CEO, stated that the company is pleased with marketing efficiency, maintaining consistent acquisition costs despite media pricing fluctuations. They are leveraging a diversified media mix and AI-based models to optimize spend, focusing on highlighting their value proposition in the current environment.

Q: Can you comment on the behavior of insurance-paying customers versus non-insurance customers? A: David Gilboa, Co-CEO, mentioned that insurance customers tend to spend more and repeat purchases more frequently. The company is underpenetrated in this area compared to the industry, but they are making progress in making it easier for customers to use their insurance benefits.

Q: What are the expected sources of leverage in EBITDA, and how are tariffs impacting this? A: Steven Miller, CFO, explained that leverage will come from non-marketing SG&A elements, with significant cost savings expected. Tariff impacts are being mitigated through global vendor shifts and selective price increases, aiming to offset potential exposure.

Q: Is there a broader opportunity for price increases beyond tariff mitigation? A: David Gilboa, Co-CEO, acknowledged that there is potential for price increases, especially as the industry has historically taken price liberally. However, Warby Parker focuses on offering exceptional value and building long-term growth, with selective price adjustments based on customer response.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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