Warby Parker’s strong debut could be a good sign for brands looking to go public

Lots of eyeballs were on Warby Parker’s direct listing this week. And the DTC darling delivered: Its stock price soared 36% in its Wednesday debut to close at $54.49, giving the company a $6+ billion valuation.

• There was a slight dip yesterday, with Warby ending the day at $53.05.

The strong showing could be a positive bellwether for the slew of online brands that have recently filed to go public, said Daniel McCarthy, assistant professor of marketing at Emory University’s Goizueta School of Business.

• A shortlist includes Allbirds, Fabletics, and Rent the Runway.

“The success that Warby Parker had with their IPO, it sends a signal to a lot of other companies that the market is receptive in general,” McCarthy told Retail Brew.

A numbers game: Still, the $6+ billion valuation surprised McCarthy, who said a figure around $2.5 billion was more in line with his expectations. Nevertheless, he does believe Warby Parker has an edge over most DTC brands.

How so? The company’s customer acquisition economics are favorable, in McCarthy’s view, as the first buy is profitable and Warby’s shoppers keep coming back.

• Earnest Research noted that Warby’s customers spend an average of $200, and repeat shoppers made up 42% of its base in 2020, up from 38% in 2019.

“They’re not really taking any risk when they acquire customers. All the repeat behavior, all the repeat purchases that they can get, it’s all just kind of icing on the cake. The second great thing about the unit economics is there’s a lot of icing on the cake,” McCarthy explained.

Warby’s IRL footprint is another positive differentiator, he noted. The company is adding up to 35 stores this year, bringing its fleet up to ~160; store sales accounted for roughly two-thirds of revenue pre-pandemic, whereas now the split is about 50-50.

• McCarthy did flag that despite Warby’s DTC start, its focus on stores might mean it could have had a “harder time growing [online]...with great economics.” (Dave Gilboa, Warby Parker’s co-CEO and cofounder, told us in June that e-comm sales were “north of 100% YoY for most of the pandemic.”)

Looking ahead: McCarthy is keeping an eye on Allbirds’ upcoming debut, a company whose economics he said aren’t as healthy as Warby’s.

“If [Allbirds is] received well, I think that could be an indication that the market is just very positive on companies like this, even when their underlying fundamentals aren’t so strong,” McCarthy said. “If Allbirds has more trouble, then I think it points to kind of this interesting bifurcation that [investors are] willing to kind of give a pass to high-quality companies, but maybe not so much in companies where the fundamentals aren’t quite as strong.”—KM