Warby Parker’s Q1 Earnings Miss: A Slip-Up or a Slippery Slope?

Warby Parker (NYSE:WRBY) delivered its first quarter as a public company with a mixed bag of results: revenue grew 11.9% year-over-year to $223.8 million, but this narrowly missed estimates by $1.66 million. Meanwhile, the EPS of $0.03 fell far short of the projected $0.11, sparking questions about the company’s ability to navigate margin pressures and deliver sustained profitability.

. Let’s dissect the numbers to determine whether this miss is a minor stumble or an ominous sign for the eyewear disruptor.

The Revenue Story: Growth, But Not Enough

Warby Parker’s top-line expansion was driven by its retail segment, which surged 14.8%, while e-commerce growth slowed to a tepid 5.5%. The company’s customer base grew 8.7% to 2.57 million trailing-12-month active users, and average revenue per customer rose 4.8% to $310—a testament to customer loyalty and upselling efforts. However, these positives were overshadowed by a revenue shortfall that, while small in absolute terms, underscores execution challenges in a competitive market.

The data would show a decelerating e-commerce growth rate amid rising competition from players like Costco’s Value Vision and Walmart’s partnership with Optical Express.

Margin Pressures: The Elephant in the Room

The real story lies in Warby Parker’s shrinking gross margin, which dipped 0.4 points to 56.3%. The culprit? A surge in contact lens sales (which carry lower margins), rising store occupancy costs, and the persistent specter of tariffs. Management warned that tariffs could shave an additional 200-300 basis points off margins this year—a stark reminder of the supply chain challenges plaguing many consumer-facing businesses.

This visual would highlight the erosion in profitability, contrasting with the company’s high gross margins of years past.

Strategic Moves: Can They Diversify Out of Trouble?

Warby Parker is doubling down on expansion. Plans include opening 45 new stores in 2025, including five shop-in-shops at Target locations—a move to capitalize on its omnichannel strategy. It also aims to reduce China-based sourcing to under 10% of COGS by year-end, potentially easing tariff-related pain but risking higher production costs elsewhere.

The company’s $265 million cash war chest provides a buffer, but its valuation remains a hurdle. With an EV/EBITDA of 111.9x, Warby Parker trades at a premium even as it battles profitability. For context, —most trade at 10-20x multiples, suggesting the market may be pricing in a growth slowdown.

Market Reaction: A Shrug, Not a Sell-Off

Investors took the news in stride, with shares edging up 0.06% pre-market. This muted response likely reflects recognition that Warby Parker’s challenges are not unique—consumer discretionary stocks face a tough macroeconomic environment. However, the EPS miss and margin warnings could deter new money from flowing in unless profitability improves meaningfully.

Conclusion: A Glass Half-Full or Half-Empty?

Warby Parker’s Q1 results are a paradox. On one hand, it achieved its first quarter of positive GAAP net income as a public company, expanded its customer base, and laid out aggressive growth plans. On the other, margin contraction and valuation concerns loom large. The company’s execution on supply chain diversification, store profitability, and tariff mitigation will be critical.

The data paints a nuanced picture:
- Growth is real, but e-commerce’s slowdown and margin pressures suggest Warby is no longer in a “scale at all costs” phase.
- Cash is king, but the EV/EBITDA multiple of 111.9x demands flawless execution to justify.
- Tariffs are a ticking time bomb, with potential margin hits of 2-3% this year alone.

Investors should weigh the company’s resilience in a tough market against its valuation. If Warby can stabilize margins through pricing power or operational efficiency, its stock could rebound. If not, the path to profitability remains foggy. For now, this is a hold—a company worth watching but not rushing into.

This comparison would show whether WRBY’s stock is underperforming peers amid broader market trends.

In the end, Warby Parker’s Q1 miss isn’t a death knell—unless it becomes a recurring theme. The next quarter will be critical to gauge whether this was a one-off stumble or an early sign of deeper turbulence.