Eyewear maker Warby Parker (WRBY +7.55%) has been publicly traded for only a few months. The company recently reported robust revenue growth in the third quarter, but is still unprofitable. In this segment of Backstage Pass, recorded on Nov. 1, Fool contributors Toby Bordelon, Jose Najarro, and Danny Vena discuss the newly public company.
Toby Bordelon: Here you see these are the financial highlights. They have not actually reported yet as a public company. They don't have any reporting they've done. This is just what they've done the last couple of years. You see the revenue growing. Gross margins are hanging in around the 60% mark for the past three years. They are growing their store count. They're growing their customer base.
It's looking really good in terms of the growth. I like what I'm seeing. The one thing I will say is that there is the market cap, I think, what is the market cap, $6 billion I think is their current market cap. It's a little bit pricey, maybe, a little bit up there, but I still think it's definitely worth taking a look at. I like this company.
Jose Najarro: Toby, I have a quick question for you. We all know glasses' heads comes in all different sizes. When you order online, do you know what process they do for measuring? Do they give you like instructions on how to measure what your glasses should be or how it goes about?
Toby Bordelon: They do, but it's interesting, too, if you to order online, they will send you five pairs for free to try on. You can try on a range of sizes. If you want to do that, you can do this multiple times, too, but they do say it's small, medium, large. You can get a couple of sizes or a couple of styles. You can try them on before you order. They also, which is new, one of the things with the glasses is it's not just the frame, you have to measure the pupillary distance, which is the distance between your pupils, so they can get the center of the lens right.
You just have to go into a store to do that or go to your optometrist, and say, "Please tell me what mine is." And of course they would know you're going to buy them online, and there may be some hesitation there. Now, you can actually do with an online tool with a camera, with a smartphone, or a PC, and just use a credit card, and they can get that pretty accurate.
I have not done that yet, but I'm probably going to do that next time because there's not a store near me, and I don't think I'm traveling anytime soon to near one. But they're getting better at that as technology increases. They also have an online tool where you can take a picture of your face and stick multiple frames on there. You can see how you would look. There's a lot of different ways you can go about that.
Jose Najarro: You kind of answered the second question I was going to go with there. I was hoping this is going to be some place where they are using technology to improve the way they grabbed the measurements, especially with the future of, like, who knows in the future, maybe augmented reality where people are using the sizes of, like, you can use your camera to measure things. That's pretty good to see that this company is innovating in one way or another trying to get into that market of measuring.
Toby Bordelon: Yeah. They're definitely getting more and more down the road there. They're doing well. With IPOs, you always wonder about the financials, you want to see a financial report. As a public company, we don't have that yet.
I'm going to be looking pretty closely at the first couple ones to see whether the reality holds up post-IPO, which is always a concern for some of these companies. But so far, I'm liking what I'm seeing, and having used the product am kind of attracted to it. Sometimes I have to temper my enthusiasm a little bit before I jump in on a company like this.
Danny Vena: This is one that I've been watching since I did a little write-up for the IPO Trailblazers service. One of the things that I'm personally watching is: We know that every company that is in the e-commerce industry got a boost during the pandemic. We know that those levels of growth have come back down to reality. What I want to see is what's a more-normalized level of growth for them before I plunk my money down.
Toby Bordelon: I think that's right. You do see in terms of the revenue, you do see their revenue like they grew a lot from 2018 to 2019, and then the growth wasn't quite as high in 2020, which could be pandemic-related actually. They could be, remember one thing you couldn't do as much during the pandemic was go to the doctor. They wouldn't let you in unless it was an emergency, especially eye doctor. You can see how in the early days there would be some concern. I don't know if I want to be up in your face looking at your eyes. I think in 2020, what it appears to be is that a lot of people just didn't buy as much in terms of eyeglasses.
They stuck with what they had until they could go back to the doctor later in the year and get an appointment. You may see some growth coming in and out, 2021 maybe that's going to catch up a little bit.
But yeah, like you said, we need to see a normalization, but the normalization after the pandemic and normalization of now they're public company, see how those things play together.
Danny Vena: Right. Well, thank you for that. I know Warby Parker is a company that I have been watching and actually here in San Diego, I've been seeing a lot more television commercials from Warby Parker. They show how they manufacture the frames and such and try to get people to contact them that way. It's certainly one I'm watching.
