Warby Parker (WRBY)

Eyewear retailer Warby Parker (NYSE:WRBY) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 15.2% year on year to $221.7 million. The company’s full-year revenue guidance of $872.5 million at the midpoint came in 1.5% below analysts’ estimates. Its GAAP profit of $0.05 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 2010, Warby Parker (NYSE:WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.

The company is known for its direct-to-consumer business model and initiatives such as the Home Try-On program and the "Buy a Pair, Give a Pair" social mission.

Beauty and cosmetics retailers understand that beauty is in the eye of the beholder, but a little lipstick, nail polish, and glowing skin also help the cause. These stores—which mostly cater to consumers but can also garner the attention of salon pros—aim to be a one-stop personal care and beauty products shop with many brands across many categories. E-commerce is changing how consumers buy cosmetics, so these retailers are constantly evolving to meet the customer where and how they want to shop.

Competitors in the eyewear retail industry include EssilorLuxottica (ENXTPA:EL), National Vision Holdings (NASDAQ:EYE), and EyeBuyDirect (private).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $850.6 million in revenue over the past 12 months, Warby Parker is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.

As you can see below, Warby Parker’s 16.1% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was impressive as it opened new stores and expanded its reach.

This quarter, Warby Parker’s revenue grew by 15.2% year on year to $221.7 million but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 15.8% over the next 12 months, similar to its six-year rate. This projection is eye-popping and implies the market sees success for its products.

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

Over the last two years, Warby Parker opened new stores at a rapid clip by averaging 17.9% annual growth, among the fastest in the consumer retail sector. This gives it a chance to scale into a mid-sized business over time.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Note that Warby Parker reports its store count intermittently, so some data points are missing in the chart below.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Warby Parker has best-in-class unit economics for a retailer, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 54.8% gross margin over the last two years. That means Warby Parker only paid its suppliers $45.17 for every $100 in revenue.

Warby Parker produced a 54.1% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Although Warby Parker was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 3.1% over the last two years. Despite the consumer retail industry’s secular decline, unprofitable public companies are few and far between. It’s unfortunate that Warby Parker was one of them.

On the plus side, Warby Parker’s operating margin rose by 4.8 percentage points over the last year, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

This quarter, Warby Parker generated an operating margin profit margin of 1.6%, up 5 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Warby Parker has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 4.3% over the last two years, better than the broader consumer retail sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Warby Parker broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 7.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Warby Parker has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 34.9%, meaning management lost money while trying to expand the business.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Warby Parker is a well-capitalized company with $280.4 million of cash and $232.5 million of debt on its balance sheet. This $47.83 million net cash position is 2.1% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see Warby Parker beat analysts’ EBITDA expectations this quarter. We were also happy its gross margin narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 7.2% to $17.67 immediately following the results.

Updated: December 4, 2025 at 10:54 PM EST

Before deciding whether to buy Warby Parker or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

In our opinion, Warby Parker is a good company. First off, its revenue growth was good over the last three years, and analysts believe it can continue growing at these levels. And while its brand caters to a niche market, its new store openings have increased its brand equity. On top of that, its projected EPS for the next year implies the company will continue generating shareholder value.

Warby Parker’s P/E ratio based on the next 12 months is 42.7x. Looking at the consumer retail landscape right now, Warby Parker trades at a pretty interesting price. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $22.45 on the company (compared to the current share price of $18.26), implying they see 23% upside in buying Warby Parker in the short term.