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On Tuesday, 03 June 2025, Warby Parker (NYSE:WRBY) participated in the Baird Global Consumer, Technology & Services Conference 2025. The company shared its strategic plans and financial outlook, highlighting both opportunities and challenges. While Warby Parker remains optimistic about long-term growth, it is adjusting its revenue growth expectations due to macroeconomic uncertainties.
Key Takeaways
- Warby Parker plans to open 45 new stores in 2025, with five in Target locations.
- Revenue growth forecast for the year is revised to 13-15%, down from 14-16%.
- The company is reducing reliance on China for sourcing to less than 10% by year-end.
- Partnerships with Google and insurance firms aim to enhance product offerings and customer benefits.
- Adjusted EBITDA margins improved to 13.1% in Q1, up nearly 200 basis points year-over-year.
Financial Results
Warby Parker has adjusted its revenue growth forecast for 2025 to 13-15%, slightly down from the previous guidance of 14-16%. The company’s first-quarter adjusted EBITDA margin reached 13.1%, marking an improvement of nearly 200 basis points compared to the previous year. Glasses continue to dominate the business, accounting for approximately 85% of revenue, while contact lenses and eye exams contribute nearly 11% and 6%, respectively.
Operational Updates
Warby Parker is focused on store expansion, planning to open 45 new stores this year, including five within Target stores. The company aims to densify existing markets, as only about 30 of the 220 cities with a Warby Parker presence have more than one store. Additionally, the company is actively reducing its reliance on Chinese suppliers, targeting less than 10% of sourcing from China by the end of the year.
Future Outlook
The company is pursuing growth through the introduction of more complex lens types and expanding contact lens and eye exam offerings. Warby Parker’s partnership with Google to develop AI-powered smart glasses represents a potential long-term growth opportunity. The company is also working to achieve 35% four-wall margins within 24 months for new stores and aims for a store payback period of 20 months or less.
Q&A Highlights
During the Q&A session, Warby Parker emphasized its commitment to fair pricing and value, stating that the $95 starting price is not fixed, and higher-priced items have not met resistance. The company highlighted its focus on enhancing vision insurance benefits, as customers using insurance tend to spend more and return more frequently. Eye exams are seen as crucial for capturing higher-margin glasses sales.
Readers are encouraged to refer to the full transcript for a detailed account of the conference call discussions.
Full transcript - Baird Global Consumer, Technology & Services Conference 2025:
Mark Altschwager, Senior Analyst, Baird: Okay, great. Welcome everybody to the Warby Parker presentation. I’m Mark Altschwager, senior analyst at Baird. Warby Parker is a mission driven vision care and lifestyle brand. It is a DTC pioneer in the eyeglasses category.
Today operates nearly 300 stores in The US and Canada. Presenting today, we have Dave Gilboa, co founder and co CEO, as well as Steve Miller, chief financial officer. So, to start out here, welcome back, by the way. I think this is third or fourth Baird conference for you. Yeah, thank you.
Warby Parker has grown to nearly $800,000,000 in revenue, the low teens growth rate over the past couple of years, taking market share in a competitive eye care category. What about the value proposition? Winning with consumers? Maybe speak to Warby’s key competitive advantages in today’s eye care market.
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Sure. So, we operate in a large and growing market, $68,000,000,000 in The US, and, the majority of Americans need corrective vision care products. But it’s a market that, has some, kind of unique structural aspects that have limited competition and innovation and have maintained high prices and low customer service. And we’ve really tried to take an approach that’s been different than the rest of the category. And so if you look at the market, it’s kind of split fiftyfifty between large optical chains like LensCrafters or Pearle Vision, and then 50% is independent optical shops.
And on the retailer side of things, there’s been a lot of consolidation that’s continued where the big companies continue to get bigger and I’ve kind of created an illusion of choice for consumers where a consumer walks into a sunglass head or a lens crafters, they see 50 different brands of glasses, don’t realize that all those brands are owned by the same company or licensed, manufactured and distributed, that also owns the store they’re standing in, that owns the vision insurance plan they’re using to pay for those glasses. And as a result, most glasses in The US are marked up 10 to 20 times what they cost to manufacture. And just the concentration of power in the category is different than kind of most other consumer categories. The other dynamic is that you have doctors that are acting as retailers, and it’s the only part of human medicine where a doctor can prescribe you something and then sell you what they’re prescribing and make margin on it. Right?
If you go to a medical doctor and they write you a prescription for Lipitor or Adderall, you’re going to independent pharmacy. The doctor’s not selling you that drug and making money on it. But within this category, it’s the exact opposite. So 75% plus of glasses are sold at the same place at the same time someone gets an eye exam. And like a lot of health care products, there’s very limited transparency around pricing.
There’s kind of a doctor that’s recommending certain products to their customer, and they feel kind of compelled to buy them even though they don’t understand why they’re all of a sudden paying hundreds of dollars for a product. And so we took a very different approach where we wanted to design high quality products that we’d want to wear ourselves, but offer them at prices that can convey fair value to customers. And the glasses that I’m wearing today cost $95 including prescription lenses, all the coatings that you could need. It’s the same price that we offered in 2010 when we launched, even though most of the category has consistently taken price at every opportunity. And so the value differential between the products that we offer and the rest of the category has expanded over time.
And certainly, that’s been the case over the last few years, where a lot of our peers with rising inflation have been even more liberal in taking price. And when we launched, we served a very narrow kind of part of the market, selling only online, only single vision glasses. And over the years, we’ve worked to dramatically expand our product assortment to include multiple kinds of progressives, contact lenses for eye exams. We now have close to 300 stores. And just as we’ve expanded our footprint and our assortment, we’re appealing to a broader part of the market and finding that customers are spending more with us over time and just that our value proposition is resonating than it ever has with the market.
Mark Altschwager, Senior Analyst, Baird: That’s great. And on the demand backdrop,
Steve Miller, Chief Financial Officer, Warby Parker: the company
Mark Altschwager, Senior Analyst, Baird: is guiding to 12% to 14% growth in the second quarter, ’13 percent to 15% for the full year. That is a small step down from last year’s growth rate as well as a step down versus your initial expectations coming into the year. On that recent call, you spoke to expectations for moderate reduction in store productivity and e commerce growth expectations again versus your initial guide. So I was hoping you could just speak broadly to the demand backdrop you’re seeing, what are the drivers to that revised outlook? And then bigger picture, to your confidence in sustaining a low teens or better top line growth algorithm longer term?
Steve Miller, Chief Financial Officer, Warby Parker: Yeah. Sure. Thanks for the question, Mark. So just as a reminder, we had guided towards revenue being up 14% to 16% this year, and that’s versus roughly 15% revenue growth last year. Given everything that we saw happening from a macro perspective in the economy, we just decided that it made sense to dial back very moderately our perspective on growth for the back half of this year, really just baking in conservatism into our model, nothing more than that.
And so we took down our projections for this year really by just a notch, going from 14 to 16% down to up 13 to 15%. We feel very confident with all of the growth drivers that we’ve laid out and the consistency and growth that we’re seeing in the business. As a reminder, the growth drivers that we’ve talked about fall into a few different categories, none of which have changed. One is opening up new stores. So for this year, we plan to open up 45 new stores over the course of 2025, ’5 of which will be a new partnership with Target, where we’re opening up five stores within a store, within, Target’s footprint.
In addition to that, we continue to roll out more complex, lens types including progressive lenses, blue light lenses, photochromic lenses, all of which add an element of growth and margin to our glasses business. As a reminder, glasses still make up 85 ish percent of our business. And we’re also in the process of rolling out these newer parts of our vision offering, I. E, contacts and eye exams, both of these are roughly $12,000,000,000 portions of the market. They’re very small portions of our business today.
Contacts makes up a little under 11% of our business and eye exams a little under 6% of our business. So in the context of the various growth drivers that we’ve laid out, the demand signals that we’re seeing in the business, we feel very confident in our ability to grow in the mid teens and really chose to dial back very moderately based on some of the macroeconomic uncertainty in in front of us.
Mark Altschwager, Senior Analyst, Baird: You recently had a very exciting announcement. You’re you’re partnering with Google to offer smart glasses. Can you give us a bit of an overview there?
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Sure. Yeah, we’re really excited. We announced a partnership a couple weeks ago with Google to develop AI powered glasses. And these are gonna be really incredible, mind blowing products that are gonna really change the way that all of us interface with AI and with technology. And we sometimes joke that glasses are the original wearable technology and they’re perfectly designed to help correct vision.
We also believe that glasses are the perfect form factor for AI. And just like the power of the Internet wasn’t really evident when everyone was using desktop computers, Mobile phones had to come along as a new form factor. We believe that the same is about to happen with classes where you have products that can know what you’re looking at and can understand what you’re hearing. And as a result, can process information in real time. They have context around you as an individual.
They know what’s on your calendar. They know everything about you and can provide real time contextual information as you’re kind of anything that you’re looking at in the world that you have questions about. It can help you answer those questions, whether it’s how to install a car seat or how to fix broken coffee machine or, you know, what plant am I looking at or what shoes that guy wearing and where can I buy them to, you know, how long is it gonna you know, can you recommend a great restaurant for me to get lunch after after this meeting and how long is it gonna take me to walk there? And partnering with Google, which their team not only invented all the models that are used by all the generative AI platforms, including ChatGPT and others, And they have incredible engineering with DeepMind. But they also just have set scale in their other products from maps to Android, which powers billions of devices, search, YouTube, Docs, Calendar, all and they have kind of such depth of data around their individual users that being able to tap into that with a smart glasses product is what we think is going to be really transformative in a number of ways to the world, but also to our business.
And for the first time, these products are going to be able to look good on your face with a battery that lasts all day. And we expect them to be replacements for traditional optical glasses and for the first time that people will really want to adopt smart glasses for all day, everyday use because they look good and have so much utility.
Mark Altschwager, Senior Analyst, Baird: How should investors think about the timing of product releases here and just anything you’re willing to frame up in terms of revenue opportunity over the next few years, anything on the economics of the partnership? I know there’s not a lot you’re sharing at this stage on those points, but just have to ask the question.
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Yeah, so we haven’t really shared too many details about the products themselves or the timing. This was announced at Google IO, which is their developer conference, really to get developers excited to start developing apps and features for kind of this new form factor. We’ll share a lot more in the coming months. The one thing we noted is that they won’t be for sale in this calendar year, but we have been working hand in glove with the Google team and are really excited about the products themselves and we’ll be excited to share more in the coming months.
Mark Altschwager, Senior Analyst, Baird: So let’s abruptly shift from an exciting topic to one that I’m sure has been a thorn in your side for the last couple of months, Steve, tariffs. You entered the year with 20% of your cost of goods sourced from China. On the recent call you outlined mitigation strategies to effectively offset the 145% China tariffs. Those were since reduced to 30%, at least temporarily. So how has your strategy on mitigation evolved from there?
Steve Miller, Chief Financial Officer, Warby Parker: Sure. And Mark, I will admit it has been a little bit more fun chatting with you about the Google partnership over the past week or so than the evolving tariff landscape. But as you called out on our last earnings call, the tariff rates then in effect were quite different than the ones in effect as of today and who knows how that might change tomorrow or next week. And so we wanted to be very clear that at 145% China tariff and 10% rest of world, if we were to not mitigate any of our exposure, that would equal a cost of roughly 40,000,000 to $45,000,000 And on our earnings call, we talked through really three mitigation actions that we’ve taken in various degrees that will even at that really high rate, which has changed, we wanted to reassure investors that we have a path to mitigating all or substantially all of that 40,000,000 to $45,000,000 The three levers that we talked about, two of them really focus on the gross margin line. So one is reallocating supply globally across a network of vendors that we’ve developed long term relationships with over time.
And we are in the process of doing that to varying degrees based on the specific product type. By the end of this year, we called out our run rate will be less than 10% in terms of products sourced from China. We’ve brought that number down significantly over time. That’s kind of mitigation lever number one. As trade deals settle out, we’ll continue to make intelligent and fast decisions about where to reallocate products.
Some of it could be in China based on what we think is best from a cost, quality and customer perspective. The second tactic that we talked about is one we have rarely ever done. Our peers in the optical market have tended to take price every single year, as Dave talked about. But the situation, we took it as an opportunity to take a look at our pricing architecture and we decided to roll out really a handful of price increases where we took price on a set number of really lens types and we introduced one new premium lens that goes light to dark in the sun even in your car. And we believe that, that will continue to have positive impact on the business.
We rolled those out April. We’ve seen some elevation to our average selling price for a pair of glasses. As a reminder, the number that we talked about on our earnings call was we expect the price changes to maybe account for a low single digit price increase across our glasses business. And then the last category, it’s really just a continuation of how we’ve been operating as a company, which is just maintaining a real focus on expense discipline and on the SG and A line in particular. So if you look at our Q1 results, for example, we generated 13.1% in adjusted EBITDA margin, almost 200 basis points increased on a year over year basis.
We had marketing spend flat as a percent of revenue. And so all of that leverage really within SG and A was driven by controlling store labor, customer experience labor, corporate overhead costs, including the salaries we pay to headquarters employees and our vendors. And it’s really in that vein that we plan to continue with expense discipline and expense management just to make sure that heading into the back half of this year, we’re maintaining a very focused approach to deploying spend.
Mark Altschwager, Senior Analyst, Baird: Excellent. And then just double clicking a bit on the supply chain. This is a question I’ve had frequently as this is all evolving, but where are you sourcing the raw materials? What are the key countries there? And then after you have the raw materials, it moves to a lab where you’re producing the product.
Some of those labs are owned, some of those labs are third party. So I guess where are those labs and then how do you balance the mix between owned and third party?
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Yes, so we operate a global diversified supply chain and some of those nodes include you know, countries like China, Vietnam, Thailand, Japan, Italy, and The US. And over the last few years, we’ve built and developed two of our own optical labs, one in Las Vegas and one in Schlotsberg, New York, about an hour north of the city. And the majority of our frames or our glasses are produced with final assembly in those optical labs where our team is able to do all the quality control and inspection and then they ship them out directly to customers. The vast majority of product before it gets to the customer is touched by a Warby Parker employee as that last step. And we have a fair amount of flexibility in the model where we look to optimize cost and speed.
If there are certain factors like tariffs that change part of that equation, then we’re in a position to make some rapid adjustments and we’ve done that over the last several weeks. In general, we find that the more control we have over the product and the customer experience, the better the results are. And so we have continued to invest in expanding our capabilities in our optical labs and you’ll see us continue to do that in the coming years.
Mark Altschwager, Senior Analyst, Baird: Back to the topic of price, as you alluded to, we are seeing planned price increases from others in the sector that would seem to give you room to raise that $95 opening price point. So maybe just speak a little bit more to your thoughts overall on price and then how important is that $95 opening price point for the brand?
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Yeah, so philosophically we are very strong believers that we should offer fair prices and great value to our customers and if we do that it’s going to build brand loyalty and customer satisfaction and those happy customers are going to tell other people about the brand and they’re going to come back and we see that. To this day, the number one source of new customers is our existing customers and we tend to see very healthy and consistent revenue retention. So once someone tries Warby Parker, they tend to tell other people about it and then come back for their next purchase. So philosophically that will remain consistent for years and decades to come. In terms of the $95 price point, we don’t think there’s any kind of real magic to that number itself.
Over the years we’ve introduced a number of additional products at different price points, including frames that cost $125 1 hundred and 40 5 dollars or $195 Some of those are made in Italy or handmade with Japanese titanium and where there is justification for us to charge higher prices, we sometimes do that. We still offer great value so those products would cost hundreds of dollars somewhere else. And as we’ve introduced additional lens offerings, those come at different price points including our progressives or premium progressives, which are, start at $395 And we haven’t seen really any price resistance from customers as we’ve introduced those higher price point items. We tend to serve a high income customer where we are the lowest cost pair of glasses they’ve ever bought. So they’re coming to us because the brand resonates with them, the designs resonate, the customer experience and they know that their dollar goes further, so they kind of feel good about their purchase.
But we do believe we have opportunity to continue to introduce products at different price points, which will continue to lead to the strong growth in average revenue per customer that we’ve seen over the last several years.
Mark Altschwager, Senior Analyst, Baird: And new store growth has also been a very important element of growth strategy. Could you talk a bit more about your approach to expansion in terms of locations you’re targeting, what’s the right pace of growth? And then you mentioned Target earlier, five shop in shops. Maybe speak to the strategic rationale of doing a partnership and what the financial implications are there versus your own stores.
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Yeah,
Steve Miller, Chief Financial Officer, Warby Parker: sure. So we have announced that we’re going to be opening up 45 new stores this year, notch above the number of new stores that we opened last year. Last year, we opened approximately 40 new stores. And so we’ll selectively take that number up over time once we reach a point where we feel like our North Star number is kept intact, which is really our Net Promoter Score. And then working backwards from that, the other two numbers that we talk about that we use to manage the success of our store rollout, there are really two metrics.
One is thirty five percent four wall margins. We want to see our stores achieve thirty five percent four wall margins within twenty four months. We typically see that happen quite sooner in the twelve to eighteen month time zone. And the other is store paybacks of twenty months or less. And we’re seeing these types of results from our newer store cohorts in line with the targets that we set for our older store cohorts.
As we think about our store rollout strategy, last year and this year, we’ll be focused more on densifying existing markets versus opening new markets, given that we’ve opened up beachheads in a number of markets already. So our city count stands at approximately two twenty cities where we have a store presence. It’s only roughly 30 of those cities where we’ve got more than one store. And so we see this as a really interesting opportunity to build off of the initial brand awareness that a store helps create in a market combined with our ecom channel and then to layer in a second store, a third store, a fourth store. If you think about our real estate strategy, this is kind of rough numbers, 50% or so of our store fleet today, a little bit under 50% is based inside lifestyle shopping centers, 25% street location, the other 25% indoor malls.
And we find no dearth of opportunities, no lack of opportunities for us to find stores within the centers that we want to be in. We’re typically viewed as traffic generator and a sought after brand, given that eyewear purchasing is an intentional purchase where you have to come in to get an eye exam. And so the deals that we’ve been able to strike with landlords at scale have generally been very favorable in terms of tenant allowance and concessions. So from where we sit today, I would characterize our store rollout strategy as consistent. We’re taking that up moderately today from 40 stores to 45 stores.
And that incremental five that we’re opening the back half of this year are through a partnership with Target. We’re going to be opening up freestanding stores within store within five suburban markets where Target operates stores.
Mark Altschwager, Senior Analyst, Baird: Thank you. Switching gears, I wanted to ask about vision insurance. Vision insurance used for I think around half of eyeglass purchases in the broader market, I think represent just about 7% of your revenue last year, though that’s doubled from three to four a few years ago. Maybe just speak to your approach to vision insurance and the opportunity ahead.
Dave Gilboa, Co-founder and Co-CEO, Warby Parker: Yeah, kind of going back to our pricing philosophy, we wanted our prices to feel fair regardless of whether people are paying out of pocket or using insurance benefits. And if you look across the category, people who use their in network benefits going to a LensCrafters or independent optical shop tend to pay $250 out of pocket even kind of after those benefits are applied. They can come to Warby Parker and buy a full pair of prescription glasses for $95 And so we’ve always wanted to deliver that value regardless of how people are paying. But we recognize that a lot of people have vision insurance benefits and we have worked hard to make it easier for people to use those benefits and have those dollars go even further when they come to Warby Parker. We announced in our partnership with Versa and MetLife last year, which nearly doubled the number of people that can use their in network benefits with us to over $30,000,000 we’re seeing kind of early positive signs.
The vast majority of those kind of new members haven’t used their benefits with us yet. Some of them might not be aware that we’re a new in network option or haven’t kind of reached their point in the purchasing cycle where they need an exam or buy a new pair of glasses. And what we found with prior carrier integrations like this is that each year we see a higher incremental revenue per member per year as awareness increases that we’re an in network option. And we tend to find that our insurance customers tend to be some of our most valuable customers. They spend more in their initial purchase.
They repeat more frequently. And so as we’re able to serve a larger population of insured customers, we view that as kind of a multi year tailwind that we’ll continue to benefit from. Okay.
Mark Altschwager, Senior Analyst, Baird: And kind of a two parter here related to services and margins, but you’ve made big investments in optometrists over the last couple of years. Now nearly 90% of your stores offer eye exams. Vision care only about five percent of your revenue, but it’s growing rapidly over 40% last year. So I guess number one, how should we think about the growth potential of these services? And then two, it would seem there is opportunity to drive some really healthy incremental margins as the utilization increases.
So how should we think about each of those?
Steve Miller, Chief Financial Officer, Warby Parker: Sure. We view eye exams and holistic vision care more broadly as critical to serving the eyewear customer in The U. S. So just as a reminder, Warby Parker got its start as a glasses only business, and glasses are still the majority of our business today. Roughly 85% of our business is selling prescription and non prescription eyewear.
Roughly 15% in total comes from the sale of these newer additions to our product portfolio. There’s eye exams, which is a little bit under 6% of our business and contact lenses, little bit under 10% of our business. And these are rapidly growing newer portions of our business. In Q1, contacts were up roughly 25%, eye exams were up 40%. But it’s interesting to really note the interconnectivity of purchasing eye exams.
So in the industry, it’s roughly 75% of all prescription glasses are purchased at the same time and at the same location as you got an eye exam. So we really view eye exams as a strategic pivot point around which we can truly serve the customer and also capture that higher margin glasses business. As it relates to eye exams market wise, eye exams are roughly an $11,000,000,000 market. So it’s a big new piece of TAM that we can access now that we have roughly 90% coverage across our stores that offer eye exams. And from a margin perspective, it does take time for an eye exam practice to ramp.
And we’ve become very adept at understanding how to match labor supply of eye doctors with demand and brand awareness generated around eye exams in stores such that we’re minimizing the dilutive effects on gross margin until an eye doctor has, one, developed a following of customers or two, until Warby Parker has actually developed brand awareness in a new geography that we offer eye exams. And so we’ve been very pleased with how we’ve seen eye exam brand awareness and utilization ramp. And as that utilization ramps, the sale of the eye exam itself becomes more profitable, but we then also are able to capture that prescription glasses sale which the eye exam leads to.
Mark Altschwager, Senior Analyst, Baird: Great. Thank you. I think we’re gonna have to wrap it there, but please everyone join me in thanking Dave and Steve.
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