eCommerce
Warby Parker's 10-K: what retail really costs a DTC brand
Warby Parker's stores drove all its growth, yet gross margin fell from 58.8% in FY2021 to 54.0% in FY2025 as the fleet doubled to 323 stores. Store rent and depreciation sit inside COGS, so retail expansion structurally compresses gross margin. The path to breakeven came from spreading fixed SG&A over a bigger revenue base, not from the stores themselves.
Key Takeaways
- Retail went from 54% to 72% of Warby Parker's revenue between FY2021 and FY2025, while e-commerce revenue barely moved ($249M to $241M). Stores did not add to online sales. They became the growth engine.
- Gross margin compressed 4.8 points as the store fleet doubled, from 58.8% (FY2021, 161 stores) to 54.0% (FY2025, 323 stores). Store occupancy and depreciation sit inside COGS, so every new store drags the reported gross margin down.
- The store cost machine ran to roughly $141M in FY2025: $35.9M of store depreciation in COGS, $38.5M in operating-lease expense, and $67.0M in buildout capex. That is about $437K per store per year before payroll or marketing.
- The operating turnaround came from spreading fixed SG&A, not better stores. SG&A fell from 85.3% of revenue to 54.6% while gross margin dropped. GAAP operating margin went from -26.6% to -0.6%, and net income finally turned positive at $1.6M in FY2025.
- Warby Parker never publishes a four-wall or channel-level margin. One reportable segment means you get the ingredients (COGS components, D&A, lease notes) but never the store-level recipe. You have to build the unit economics yourself.
Most founders think of opening a store as adding a channel. Warby Parker's filings show it is closer to installing a fixed-cost machine that quietly reshapes your entire P&L. The company (ticker WRBY) ended FY2025 with 323 stores and $871.9M in revenue, and only in that year did it cross to a razor-thin net profit of $1.6M. The interesting part is not that it took this long. It is what the retail scale-up did to the margins on the way. If you are modeling your first location, or your tenth, the 10-K is a free case study in what physical retail actually costs a direct-to-consumer (DTC) brand.
The channel shift hiding in the footnotes
Start with where the growth came from, because it is not where most people assume. Between FY2020 and FY2025, Warby Parker's total revenue more than doubled. But almost none of that came from e-commerce. Online revenue was $237.4M in FY2020 and $240.9M in FY2025. Essentially flat over five years. Retail revenue, meanwhile, went from $156.3M to $631.0M.
Retail did not add to the online business. It replaced it as the growth engine. The channel mix inverted: retail was 39.7% of revenue in FY2020 and 72.4% by FY2025, while e-commerce fell from 60.3% to 27.6% of the mix even though online dollars held roughly steady.
| Fiscal year | Stores | E-commerce ($M) | Retail ($M) | Total ($M) | Retail share |
|---|---|---|---|---|---|
| 2020 | 126 | 237.4 | 156.3 | 393.7 | 39.7% |
| 2021 | 161 | 249.3 | 291.5 | 540.8 | 53.9% |
| 2022 | 200 | 234.0 | 364.2 | 598.1 | 60.9% |
| 2023 | 237 | 226.7 | 443.1 | 669.8 | 66.1% |
| 2024 | 276 | 233.6 | 537.8 | 771.3 | 69.7% |
| 2025 | 323 | 240.9 | 631.0 | 871.9 | 72.4% |
When I talk to founders running a brand this size, they almost always describe their first stores as a way to reach customers who never convert online. That can be true. But the WRBY data reframes the bet. If your online revenue plateaus and stores become the only place growth happens, you are not diversifying. You are swapping a near-zero-fixed-cost channel for one that carries rent, payroll, and depreciation on every dollar. That swap is the whole story of the next four sections.
Why retail compresses gross margin: what COGS actually contains
Here is the mechanism that trips people up. Warby Parker's 10-K spells out what goes into cost of goods sold, and it is not just product. The filing states that COGS includes product costs, optical lab costs, customer shipping, "occupancy and depreciation costs of retail stores," and employee costs tied to eye exams. A separate lease note confirms it: retail, lab, and distribution-center rent is recognized in COGS, and all other rent goes into SG&A.
Read that again, because it is the crux. Store rent and store depreciation are inside gross margin. So the more of your revenue that comes through physical stores, the more fixed occupancy cost sits above the gross-profit line, and the lower your reported gross margin goes. It is not that the stores are badly run. It is arithmetic.
The numbers track the store count almost perfectly in reverse.
| Fiscal year | Stores | Gross margin | Operating margin (GAAP) | SG&A % of revenue | Adj. EBITDA margin |
|---|---|---|---|---|---|
| 2021 | 161 | 58.8% | -26.6% | 85.3% | 4.6% |
| 2022 | 200 | 57.0% | -18.6% | 75.6% | 4.5% |
| 2023 | 237 | 54.5% | -10.7% | 65.3% | 7.8% |
| 2024 | 276 | 55.3% | -3.9% | 59.2% | 9.5% |
| 2025 | 323 | 54.0% | -0.6% | 54.6% | 10.9% |
Gross margin fell 4.8 points as the fleet doubled from 161 to 323 stores. Two smaller factors are worth naming so you do not over-attribute the whole move to occupancy: contact lenses, which sell at lower margin, grew to about 11% of revenue. And the entire FY2024-to-FY2025 gross margin step down was just 1.3 points, which the 10-K attributes to a mix of tariff costs on glasses, that growing lower-margin contact-lens business, higher doctor headcount, and shipping, on top of the occupancy drag. Strip those FY2025-specific items out and the FY2021 to FY2024 path (58.8% to 55.3%) is the cleaner read on structural retail drag. The direction does not change. Physical scale pulls the blended gross margin down.
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The store cost machine: rent, depreciation, and buildout
The gross margin line hides the size of the fixed-cost commitment, so it helps to pull the pieces out and stack them. Three costs move together as the fleet grows: store depreciation that lands in COGS, operating-lease (rent) expense, and the capex to build each new store.
| Fiscal year | Stores | Store D&A in COGS ($M) | Operating-lease expense ($M) | Buildout capex ($M) | Cash paid for leases ($M) |
|---|---|---|---|---|---|
| 2023 | 237 | 26.1 | 30.1 | 53.7 | 37.1 |
| 2024 | 276 | 30.5 | 34.9 | 64.0 | 44.5 |
| 2025 | 323 | 35.9 | 38.5 | 67.0 | 47.8 |
Add the store depreciation, rent, and capex lines together and the retail machine cost Warby Parker roughly $141M in FY2025. Spread across 323 stores that is about $437K per store per year, before a dollar of store payroll or marketing. On top of the annual burden, the company carried about $279M in total undiscounted future lease obligations with a weighted-average remaining term near six years. Buildout ran about $1.4M gross per new store in FY2025.
When we have watched brands make the jump from DTC to physical, the failure mode is almost never the AUV assumption. It is that occupancy is fixed and sales are not. One founder I work with signed a lease penciled at 12% of projected store revenue, then sales came in about 25% under plan. The margin damage was not proportional to the miss. It was far worse, because the rent, the fixtures, and the depreciation did not care that the store missed. That is the exact exposure Warby Parker's structure encodes: put occupancy in COGS, and a revenue shortfall hits gross profit dollar for dollar in the occupancy tranche.
Where the operating turnaround actually came from
If gross margin fell as stores grew, how did Warby Parker go from a -26.6% operating margin to nearly breakeven? The answer is not the stores. It is everything above the stores.
SG&A as a share of revenue fell from 85.3% in FY2021 to 54.6% in FY2025. That is 30-plus points of margin recovered by spreading a mostly fixed cost base over a growing revenue line, helped by stock-based compensation normalizing after the IPO. Absolute SG&A dollars barely moved, from $461M to $476M, while revenue grew 61%. That gap is the whole turnaround. GAAP operating margin climbed from -26.6% to -0.6%, and net income tipped positive at $1.6M, helped by about $8.4M of interest income on the cash pile.
Warby Parker's Adjusted EBITDA margin improved from 4.6% to 10.9% over the same stretch, which looks like a clean retail success story. But EBITDA strips out the $35.9M of store depreciation that is the real economic cost of the fleet. The stores did not carry the turnaround. Corporate discipline did. Read the operating line, not the EBITDA line, when you are deciding whether physical retail is paying for itself.
The lesson for an operator is uncomfortable but clean: adding stores can grow revenue and still dilute margin for years. The path to profit ran through spreading fixed overhead, not through stores that print cash on day one.
What the filing will not tell you, and how to model it anyway
Here is the disclosure ceiling. Warby Parker reports one operating segment and one reportable segment, "holistic vision care," and its co-CEOs evaluate the business on consolidated net income. There is no retail-versus-e-commerce operating margin, no per-store P&L, no channel contribution line. You get the ingredients (COGS components, the depreciation note, the lease note, the capex line) but never the store-level recipe.
The pattern we see again and again is founders tracking AUV as if it were profitability. Warby Parker's implied AUV of roughly $2.1M per store is healthy for optical. But AUV says nothing about whether the store clears its own costs. You have to build that yourself, and the WRBY filing gives you the benchmarks to do it:
- Start from the four-wall target. Management has told analysts it aims for about 35% four-wall margin on new stores with paybacks inside roughly 20 months. Use that as your store-level contribution target before central marketing and corporate G&A.
- Load occupancy as a percentage of store revenue, not a flat rent. For specialty optical, keep it in the 8-10% healthy band. Warby Parker's total lease expense was about 6.1% of retail revenue, but that includes lab and distribution rent, so treat store-only occupancy as somewhat higher.
- Put buildout capex and its depreciation into the model explicitly. At roughly $1.4M gross buildout per store, the depreciation alone is a real annual charge that hides inside COGS. Net it against any tenant-improvement allowance you can negotiate.
- Compare against the peer set. National Vision, a larger optical chain, ran costs applicable to revenue near 41.9% and adjusted SG&A near 49.6% of revenue in FY2025, with e-commerce at only about 7% of net revenue. Different mix, same lesson: optical retail lives or dies on occupancy and store labor discipline.
The asymmetry is the thing to sit with. Warby Parker's $241M of e-commerce revenue carried almost no occupancy cost. Its $631M of retail revenue carried something like $141M in combined depreciation, rent, and buildout. Both channels can be right for a brand. But they are not the same financial instrument, and the 10-K is the clearest free proof of that you will find. If retail economics are dragging your blended margin, sorting the channel math is exactly what our fractional CFO team does.
Sources and methodology
Warby Parker Inc. 10-K for fiscal year 2025 (SEC EDGAR). The primary source for channel revenue disaggregation, the COGS policy language that places store occupancy and depreciation inside cost of goods sold, the property and equipment and lease notes, the segment disclosure, and the Adjusted EBITDA reconciliation. Filed February 2026, accession 0001504776-26-000006. See the full Warby Parker filing history on SEC EDGAR.
SEC EDGAR XBRL company facts for Warby Parker (CIK 1504776). The machine-readable GAAP series used for revenue, gross profit and gross margin, operating income and margin, SG&A, net income, and EPS across FY2021 through FY2025. This is the authoritative spine for every margin figure in this post, pulled from the SEC EDGAR company facts API.
Warby Parker 10-K filings for FY2022 and FY2024 (SEC EDGAR). Used to recover channel revenue for FY2020 and FY2021 and to cross-check the depreciation and store-count history. All Warby Parker annual reports are available through the same EDGAR filing index above.
National Vision Holdings Q4 FY2025 earnings release. Used for the peer comparison on costs applicable to revenue, adjusted SG&A, and e-commerce mix in optical retail. See the National Vision investor news releases.
Occupancy cost benchmarking. The 8-10% healthy specialty-retail occupancy band references standard specialty-retail occupancy-cost guidance, cross-referenced against the lease-risk disclosures in optical-chain filings. Four-wall margin and payback targets are drawn from Warby Parker management commentary to analysts, not from the 10-K itself, and are labeled as targets rather than reported results throughout this post.
Charts. This edition ships as data tables only. The interactive charts were not available at publication and will be added on the next refresh. Every figure in the tables ties to the filings above. For more on how channel choice moves margin, see our reads on Amazon versus DTC margin benchmarks and retail versus DTC margins.
Frequently asked questions
why did warby parker's gross margin go down when they opened more stores?
Because store rent, utilities, and store depreciation are booked inside cost of goods sold, not in operating expenses. So every new store adds fixed occupancy cost directly to COGS. As the fleet grew faster than revenue per store, gross margin fell from 58.8% in FY2021 to 54.0% in FY2025 even though the business got healthier overall.
what is a four-wall margin and does warby parker disclose it?
Four-wall margin is store revenue minus store-level costs (labor, rent, utilities, direct operating costs) but before central marketing and corporate overhead. Warby Parker has told analysts it targets about 35% four-wall margins on new stores with paybacks inside 20 months, but it does not publish four-wall margin in the 10-K. It reports one consolidated segment, so you have to infer store economics from the disclosed components.
how much does it cost warby parker to open a new store?
In FY2025 the company spent $67.0M of capex against 47 new stores, which works out to roughly $1.4M of gross buildout cost per new store before any landlord tenant-improvement allowances. Warby Parker disclosed about $11.6M of expected tenant-allowance cash inflows for 2026, so the net buildout is lower, but the gross number is what hits your balance sheet first.
at what store count did warby parker actually become profitable?
It reached breakeven around 323 stores in FY2025, posting net income of $1.6M and a GAAP operating margin of -0.6%. Note that net income only turned positive with the help of about $8.4M in interest income. The stores themselves were not the source of the swing to profit. Spreading fixed corporate overhead was.
why does a dtc brand's gross margin compress when it goes physical?
Online orders carry almost no fixed occupancy cost. A physical store adds rent, store payroll, utilities, and depreciation, and retail accounting puts occupancy and store depreciation into COGS. So the moment stores become a big share of revenue, the blended gross margin gets pulled down toward the lower retail-inclusive number, even if each store is a good business on its own.
should i model my first store as gross margin contribution or net operating contribution?
Model net operating contribution, not gross margin. AUV (revenue per store) and gross margin tell you almost nothing about whether the store makes money. You need to load in rent, store payroll, utilities, depreciation on the buildout, and an allocation of the marketing that drives foot traffic. Warby Parker's own four-wall target of about 35% is a useful benchmark for the store-level line before corporate overhead.
what occupancy cost percentage should i benchmark before signing a lease?
For specialty optical and similar high-margin specialty retail, healthy occupancy runs about 8-10% of store revenue, 10-12% is workable, and above 12-13% is a warning zone. Warby Parker's total operating-lease expense was about 6.1% of retail revenue in FY2025, but that line includes lab and distribution rent too, so treat it as a floor for the store-only number, not a ceiling.