NEW YORK—Optical retailer Warby Parker (NYSE: WRBY) reported solid gains for the third quarter ended Sept. 30, 2022, despite economic headwinds that reduced consumer demand for eyewear and eye exams. The company generated $148.8 million in net revenue, up $11.4 million, or 8.3 percent, versus third quarter 2021. Warby Parker posted a net loss of $23.8 million, down $67.2 million compared with the year-ago period, when the company was incurring expenses related to the company’s direct listing on the New York Stock Exchange. Adjusted EBITDA was $11.9 million, and adjusted EBITDA margin was 8.0 percent, an increase of 400 basis points from Q2 2022.

“Thanks to our team’s hard work and execution, Warby Parker delivered solid results in a quarter where inflationary concerns and weakening consumer demand continue to impact our industry,” said co-founder and co-CEO Dave Gilboa. “Our team took important steps to advance our mission and strategic growth initiatives, all while maintaining our focus on exceeding customer expectations and making it easier to choose Warby Parker.

"This quarter, we meaningfully invested in our eye exam business, expanded our contacts business, and opened 13 new stores, bringing our total store count to 190,” Gilboa said.

Co-founder and co-CEO Neil Blumenthal, added, “Despite a challenging operational environment, our brand, value proposition, and omnichannel model continue to resonate with consumers and drive incremental demand. Warby Parker offers customers more options and better value than ever before, and, in turn, customers are spending more with us.

"As we approach the holiday season, we aim to build on our loyal customer base, deliver significant value to all our stakeholders, and execute on our vision for reshaping the industry,” Blumenthal said.

Warby Parker recorded a 5.1 percent increase in the number of active customers in third quarter, to 2.26 million. The average revenue per customer increased 6.8 percent year over year to $258, the company said, while revenue from its relatively new contact lens business increased by nearly 50 percent year over year.

Gross profit increased 6.0 percent to $84.4 million. Gross margin was 56.7 percent compared to 58.0 percent in the prior year. Warby Parker attributed the gross margin decrease primarily to the impact of its growing store count, higher store occupancy and depreciation costs and the increased penetration of contact lenses, which carry lower gross margins than eyeglasses.

The company’s strategy to grow its contact lens offering requires an increase in salary and benefit costs associated with optometrists as it scales its eye exam offering across its fleet, to 139 exam locations, up from 95 in the prior year period. The scaling of higher margin progressive lenses and leverage from Warby Parker’s in-house optical laboratory network partially offset the gross margin decrease, the company said.

Selling, general and administrative expenses (“SG&A”) decreased $63.6 million to $108.1 million, or 72.6 percent of revenue, primarily driven by stock-based compensation and related payroll taxes and professional costs incurred in 2021 related to the company’s direct listing on the New York Stock Exchange. Also contributing to the decrease were lower charitable expenses related to the donation of stock to the Warby Parker Foundation, which was completed in the second quarter in 2022, as compared to the third quarter in 2021.

Warby Parker ended the third quarter of 2022 with $197.9 million in cash and cash equivalents.

The company revised its full-year outlook by increasing projected net revenue from $590 to $596 million, representing growth of 9.1 percent to 10.2 percent versus full year 2021. Adjusted EBITDA will rise approximately $25 million to $27 million, with an adjusted EBITDA margin of approximately 4.2 percent to 4.5 percent. 40 new store openings will bring the total projected store count at year-end to 200.