Warby Parker Inc. (WRBY) Earnings

Management highlights

- Strategic Priorities and Preparations for Intelligent Eyewear Launch * After years of development, Warby Parker is on track to unveil its full Intelligent Eyewear Collection in fall 2026, with customer deliveries scheduled for the 2026 holiday season. The product combines fashionable, comfortable everyday eyewear with 9 hours of typical-use battery life and Google Gemini AI functionality, with a customer experience centered on privacy. * The company's omnichannel retail model is positioned as a key competitive advantage for the new category, allowing customers to try on the product, get expert guidance and prescription fitting, and access ongoing post-purchase support. 350+ existing retail stores will offer demos, and most units will be custom made for customers in Warby Parker's optical labs. * The company is accelerating one-time foundational investments in technology infrastructure, optical lab retrofitting, quality control, team training, and go-to-market marketing ahead of the launch, all funded by $14.4 million in total 2026 tariff refunds. No revenue from intelligent eyewear is included in 2026 guidance. - Core Business Operational Progress * Opened 15 net new stores in Q2 2026, bringing the 2026 half-year total to 29 net new stores, putting the company on track to hit its 2026 target of 50 total net new store openings. Two-thirds of the U.S. population now lives within 30 minutes of a Warby Parker store, which will support intelligent eyewear customer adoption. * Launched a dedicated large-scale eye exam marketing campaign that generated 200 million impressions, and deployed a custom AI-built in-house electronic health record system to support exam business growth. Eye exams are a high-value customer acquisition channel with strong conversion rates. * Expanded insurance coverage capabilities: as of Q2 end, the company has over 35 million in-network lives (up from 32 million last quarter), with 20% year-over-year in-network business growth. Out-of-network claim submission penetration has now surpassed in-network penetration, driven by the new seamless point-of-sale submission tool that simplifies reimbursement for customers, and out-of-network customers have average order values close to in-network customers. * Completed the sunset of the legacy home try-on program, with cost savings redirected to higher-return investments. Organic web traffic has rebounded after investments in content and personalization features, and the home try-on growth headwind will continue to diminish through 2026 and fully abate in 2027. * Launched five new product collections in Q2, including Warby Parker Sport, the company's first performance eyewear line designed for prescription customers at accessible price points, with early encouraging customer adoption. * Trailing 12-month active customers grew 4.1% year-over-year, and average revenue per customer increased 6.6% year-over-year. The company is targeting stronger active customer growth in the back half of 2026, with improving in-period growth trends already visible.

Guidance

- Management reaffirmed full-year 2026 guidance, with total expected revenue of $959 to $976 million, representing 10% to 12% year-over-year growth. The full-year 2026 adjusted EBITDA guidance is reaffirmed at $117 to $119 million, equal to a 12.2% adjusted EBITDA margin and 130 basis points of year-over-year margin expansion. - Full-year 2026 e-commerce growth is expected to be in the low single digits year-over-year, as the home try-on headwind diminishes in the second half. - Q3 2026 guidance calls for revenue of $243 to $246 million, representing 10% to 11% year-over-year growth. The guidance reflects planned incremental investments ahead of the intelligent eyewear launch, and accounts for tough year-over-year comparable growth from Q3 2025. - Management expects strong year-over-year revenue growth in Q4 2026, driven by the diminishing home try-on headwind, increased marketing investments, and easier year-over-year comparisons. Q4 2026 will also benefit from the launch of the new paid protection program, which will add incremental high-margin revenue. - All 2026 guidance explicitly excludes any expected revenue from the Intelligent Eyewear launch and any halo traffic benefit to the core business from the launch, as a conservative/prudent approach. - The $14.4 million total 2026 tariff refund benefit is fully allocated to fund the incremental strategic and launch-related investments in 2026, so the benefit does not flow through to higher net EBITDA.

Segment performance

Warby Parker reports combined performance across its core retail, e-commerce, and eyewear product segments, with overall Q2 2026 total revenue of $236 million, representing 10% year-over-year growth. Adjusted EBITDA was $32.9 million (14% margin), including an $11.8 million tariff refund benefit. Adjusted gross margin was 58.1% of revenue, 380 basis points above last year, with the 500 basis point improvement from the tariff benefit partially offset by fixed cost deleverage from expanded doctor headcount, accelerated store openings, and enhanced optical lab quality control. Adjusted SG&A expenses were $119.3 million (50.6% of revenue), 170 basis points higher year-over-year driven by higher retail compensation and technology investments for intelligent eyewear integration. The eye exam business grew over 30% year-over-year. E-commerce revenue was flat year-over-year due to the transitory headwind from the 2025 end of the home try-on program; excluding this headwind, e-commerce glasses and contacts order volume grew low double digits year-over-year. Contacts revenue grew high single digits year-over-year, primarily driven by retail, and penetration remained steady at approximately 11% of total revenue. In-network insurance business grew over 20% year-over-year, with total insurance penetration reaching 8% of revenue (up from 7% year-over-year). The newly launched Warby Parker Sport performance eyewear collection is seeing early strong conversion and higher average order values, with a higher share of new customers than the core sun business and strong adoption of progressive lenses.

Risks & headwinds

- Industry-wide softness in retail eyewear category traffic and unit sales is a headwind, with most peers growing primarily through price increases rather than volume, which has impacted Warby Parker's near-term new customer acquisition results. - Launching an entirely new product category (intelligent/AI-enabled eyewear) introduces operational complexity, including required changes to existing technology systems (POS, inventory tracking, order management), optical lab retrofitting, and new quality control and loss prevention processes to account for the higher-unit-cost electronic product. - Near-term demand for the new intelligent eyewear category is uncertain, and pre-order data will be used to adjust inventory planning to avoid excess inventory or unmet demand. - Unexpected softness in sales in the final two weeks of Q2 2026 pulled full-quarter results to the low end of the prior guidance range, highlighting potential continued near-term demand volatility in the macro environment.

Analyst Q&A

• Q: Can you elaborate on retail traffic trends, preparations for back half traffic growth, and your SG&A fixed/variable cost structure as you scale intelligent eyewear?

  A: Industry-wide retail traffic and unit softness is impacting the entire category, but Warby Parker has strong conversion, record high average order value, and gained market share in Q2. The company is testing new customer acquisition tactics, expanding in-network insurance coverage to 35 million lives, and expects trailing 12-month active customer growth to rebound strongly in Q4 after a Q3 dip. Most 2026 incremental investments are one-time foundational costs to integrate intelligent eyewear into existing systems (like adding serial number tracking and building a new paid warranty program), and management will provide clearer run-rate expense guidance for 2027 after launch.

• Q: What is driving improving in-period active customer growth, and how are you approaching inventory planning, pricing, and margins for intelligent eyewear?

  A: Improving growth is driven by strong underlying e-commerce growth (excluding the home try-on headwind), fast-growing eye exam traffic from new marketing campaigns, and strong growth in both in-network and out-of-network insurance utilization. Most intelligent eyewear will be custom made for customers in Warby Parker labs, so store inventory will be limited to demo units similar to core eyewear, reducing excess inventory risk. Pre-orders will be used to gauge demand and adjust supply. On a percentage basis, intelligent eyewear will have healthy margins similar to the core business, with fixed retail and labor costs remaining constant, so incremental revenue will flow through to the P&L.

• Q: What is the update on the Target shop-in-shop rollout, how will intelligent eyewear be displayed in stores, and what is the long-term new store opening plan?

  A: Five new Target shop-in-shops will open this fall, with improved external signage in new markets, and all locations will offer intelligent eyewear demos and sales. The company continues to test and learn from this format. Intelligent eyewear will be added to existing store layouts with new fixtures, and does not change the long-term plan of ~50 net new store openings per year. Insurance progress continues with steady growth in in-network lives and strong adoption of the new out-of-network claim tool.

• Q: What are your fuel cost assumptions for the back half, and is the $14.4 million tariff refund the total expected benefit?

  A: Management expects continued fuel cost volatility, but new shipping carrier contracts implemented in July 2026 will deliver margin benefits. The $14.4 million total 2026 tariff refund is the full expected total benefit, with all proceeds allocated to fund incremental 2026 investments. Additional operational initiatives, including the new high-margin paid protection program and partner co-funded marketing, will support bottom line results for the year.

• Q: Can you confirm confidence in full year guidance, explain the Q4 step-up, and share more details on the out-of-network insurance tool?

  A: Management has high confidence in the full year guidance, with unexpected softness in the final two weeks of Q2 pushed results to the low end of the range, but a July rebound has occurred. The home try-on headwind will shrink from 2.8pp of growth headwind in Q2 to 1.7pp in Q3 to just 0.5pp in Q4, and Q4 2025 has an easier comparable than Q3 2025. The new out-of-network tool automatically submits claims in-store for customers, and penetration has already surpassed in-network penetration. Out-of-network customers have AOV nearly equal to in-network customers, so the tool is driving incremental high-value sales.