Warby Parker Inc. (WRBY) is a leading name in the eyewear field, with designer-looking prescription glasses at reasonable prices. Yet it has just a tiny morsel of the overall market ($66 billion in the US alone, which itself is growing steadily), highlights Mike Cintolo, editor of Cabot Growth Investor.
The firm has been around for a while, but just came public in 2021. That was just in time for the market top and, combined with a breakeven-ish bottom line, resulted in a huge decline for the stock and elongated bottoming effort.
But now the stock is in gear. While growth isn’t rapid, the top brass has made the right moves in terms of marketing and customer acquisition, and on the growth side of things, there’s a very solid, underlying, cookie-cutter story with very solid store economics.
At the end of Q3 2024, Warby had 269 locations after opening 32 new shops in the first nine months of the year. Those open more than 12 months were showing strong year-over-year growth. New locations were continuing to pay back the initial investment in 20 months, on average, which is very solid.
Meanwhile, the store expansion and careful marketing have both the customer count (2.4 million in Q3, up 5.6%) and revenue per customer (up 7.5%) heading higher. Probably most impressive is that once you’re a Warby customer, you tend to stay that way, with a revenue retention rate of 100% when looking out four years.
Of course, this is still eyewear, so the growth isn’t wild. Sales have risen 13% the past two quarters and low/mid-teens growth is likely going forward. But earnings and EBITDA are lifting off at much faster clips, which has helped the stock to break out.
After etching a 31% deep base over 20 weeks, WRBY got going in early November and was smoke up a chimney in the weeks that followed, reaching two-and-a-half-year price highs. To be fair, the stock is a bit thinly traded. But we think the name could be “growing up” as more institutions (318 funds owned shares at the end of September) build positions and as the steady growth story plays out.
