Warby Parker: new vision blurs business boundaries – Californianewstimes.com

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Razor and blade pricing has long dominated eyeglass retail. Opticians offer cheap vision tests and regain margins with the markup for eyeglass sales. Warby Parker has set out to confuse it by selling trendy eyeglasses online to US consumers who first get prescriptions from their in-store rivals.
The 11-year-old company is often featured as a model for running a retail business. However, as it goes public on the stock market, it is pivoting towards an industry integration model that was trying to shake its business plans.
Warby Parker made its debut on Wednesday with a direct listing. The stock opened at $ 54.05 (more than one-third of the reference price), bringing market value to over $ 6 billion. The losing company was valued at $ 3 billion in the final funding round 13 months ago. Day trading pop on the first day means that the company trades at 15 times last year’s earnings. A much larger eyewear conglomerate, EssilorLuxottica is only a multiple of five times.
Retailers argue that premiums are reasonable given the company’s resilient performance during a pandemic. Revenues increased 6% last year to nearly $ 394 million, compared to EssilorLuxottica’s 17% decline. However, focusing on top-line growth ignores the challenges Warby Parker (and other direct-selling brands) face in achieving profitability.
Warby Parker’s revenue growth is by no means cheap. The company’s marketing spending surged from 13% in the previous year to 19% in 2020.
Its cost base is unlikely to drop soon. Warby Parker started out as an e-commerce business, but looks to the future in physical stores. Many still prefer to buy eyeglasses directly — and don’t worry about rewarding opticians this way.
Two-fifths of last year’s revenue came from 142 retailers. Plans to open more stores add to that fixed cost. However, the surge in company valuation since last year means that it will be significantly more profitable. These two are difficult to adjust and difficult to read.

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