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Warby Parker’s stock drops after surprise quarterly as gross margin keep falling

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Shares of Warby Parker Inc. pulled back sharply Wednesday after the eyewear retailer reported a surprise fourth-quarter loss as gross margins continued to fall.

The stock
WRBY,
+7.66%

dropped 8.6% in premarket trading. The stock had run up 18% month to date ahead of the results, including a 7.7% jump on Tuesday.

The company reported net losses for the quarter to Dec. 31 that narrowed to $19.05 million, or 16 cents a share, from $20.25 million, or 18 cents a share, in the same period a year ago.

Excluding nonrecurring items, the adjusted net loss was $1.11 million, while the FactSet consensus called for earnings per share of 1 cent.

Gross margin declined to 53.8% from 55.1%, due primarily to increased sales of contact lenses, which are sold at a lower margin than glasses. Other factors weighing on gross margin included increased doctor salaries — coupled with an increase in the number of stores offering eye exams — and increased store-occupancy costs.

The company has reported year-over-year declines in gross margin for every quarter since going public in September 2021.

Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), which is often a closely watched measure of underlying profitability for startups, rose to $9.4 million from $8.6 million, but missed the FactSet consensus of $9.8 million.

Revenue grew 10.5% to $161.9 million, to beat the FactSet consensus of $160.9 million, as active customers increased 2.5% to 2.33 million and average revenue per customer increased 9.3% to $287.

For 2024, the company expects revenue of $748 million to $758 million, which surrounds the current FactSet consensus of $751.2 million.

The stock has rallied 39% over the past three months through Tuesday, while the S&P 500
SPX,
+0.17%

has gained 11.5%.

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