Finally, the Fund initiated a position in Warby Parker Inc. (WRBY, Financial) following its direct listing. Warby Parker is a fast-growing provider of vision care services, selling eyeglasses, contact lenses, eye exams, and accessories from 145 stores and its website. Warby Parker was founded in 2010 and is a pioneer of the direct-to-consumer model. By circumventing traditional channels, designing products in-house, and engaging with customers directly, Warby Parker can sell a pair of prescription glasses at $95 (including lenses) which is a fraction of the price of incumbents. Warby Parker’s customer-centric approach, reasonable prices, quirky and fun store environments, and attractive product assortment has led to an industry leading net promoter score (“NPS”) of 83 vs. 30 for optical peers. With just 1% market share, we believe there is meaningful opportunity for Warby Parker to scale in the years and decades ahead.
Warby Parker operates in the large and growing $35 billion U.S. eyewear industry. The industry is characterized by consistent, stable growth driven by a large, aging population with a consistent replenishment cycle. The Vision Council reported that nearly 200 million or 76% of adults in the U.S. were using some form of vision correction in 2020. In addition, the number of Americans ages 65 and older will more than double over the next 40 years. On average, glasses wearers replace their glasses every two to two and a half years. More recently, increasing screen time usage has contributed to increased vision correction needs and consistent new customer growth for the eyewear market.
We believe Warby Parker has a long runway for growth. The company operates just 145 stores today, a fraction of its target of 900 locations. New store openings are supported by payback periods of under 20 months, industry leading NPS, and favorable industry dynamics. We also are excited about Warby Parker’s opportunity to add additional products and services such as contact lenses, progressives, and eye exams. As the company grows, we expect margins to improve from 6% currently to 20% or higher over time. Lastly, we admire management’s commitment to corporate philanthropy. The company’s “Buy a Pair, Give a Pair” program, which donates a pair of glasses for every pair sold, has already resulted in 8 million frames donated.
From Ron Baron (Trades, Portfolio)'s Baron Growth Fund fourth-quarter 2021 letter.
