Warby Parker Joins List of Consumer Brands to Go Public

Warby Parker Eschews Traditional IPO

Warby Parker, the consumer-eyewear company, is going public via a direct listing, becoming the latest direct-to-consumer company to choose this route. While IPOs have traditionally been the way startups raise capital, direct listings are becoming more popular as companies opt to save money that would typically go to bankers. Among the names that have gone public through a direct listing are Coinbase (COIN), Palantir (PLTR), and Spotify (SPOT). One major differentiator between the two is that no new shares are created in a direct listing. Only existing outstanding shares are sold.

Warby Parker is following closely on the heels of other consumer companies that have chosen to go public recently. The list includes Honest (HNST), the organic consumer-products maker and Figs (FIGS), which makes scrubs for the medical industry. Allbirds, the green sneaker maker, is also expected to launch an IPO.

Losses Continue for Eyewear Company

In its filing with the Securities and Exchange Commission, Warby Parker disclosed revenue of $270.5 million for the first half of 2021 and losses of $20.4 million. For all of 2020 it had revenue of $393.7 million and lost $55.9 million. The company warned it needs to generate and sustain increased revenue as well as keep costs at bay to achieve profitability. In March 2020 it closed all its stores as the COVID-19 pandemic struck.

Internet sales have cushioned the blow for the eyewear retailer, with 60% of its 2020 sales coming from online channels. Ecommerce accounted for 50% of its overall sales in the first six months of 2021. The company currently has 145 owned and operated stores and 95% of its revenue comes from selling eyewear.

Warby Has Loyal Fans

Warby Parker was founded in 2010, shipping eyewear directly to consumers to try on in the comfort of their own homes. It subsequently expanded into retail stores and retreated when the pandemic hit. The company has a loyal following of customers and investors. Since its inception it has raised $245 million at a $3 billion valuation. Meanwhile it has a loyal base of customers which has so far translated into high retention rates.

Warby Parker is tapping the public markets at a time when direct-to-consumer brands are having a moment. With the eyewear market in need of some disruption it will be interesting to see if a broader base of investors think Warby Parker is the one to do it.

CARES Act Student Loan Relief Extension

The Biden Administration extended the pause on student loan repayment, interest, and collections through Jan. 31, 2022. Watch the replay of our recent event to learn what this means for your loans.

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Staying Invested

A Weekly Column With Liz Young

Every week, SoFi’s Head of Investment Strategy shares her economic and market insights in order to help empower readers to take a more active role in their financial futures. This week, see what Liz has to say about staying invested.

Came for the Gain, Stayed for the Pain

As markets hit all time highs again and again, it may seem odd to read a column that’s urging investors to stay in it. Who wouldn’t? And haven’t a lot of new investors come on board in the last 18 months? What makes me think I need to convince anyone to stick around in a year when the S&P has returned 20%, and is up 100% since the low in March 2020?

I’m not a new investor, and experience has taught me that a strong return pattern is usually peppered with periods that will test your conviction. If and when your conviction gets tested, here are some things to remember.

Bumps are Common, Bears are Rare

A bear market is defined as a pullback of 20% or more, peak to trough. Typically, we don’t go into bear market territory unless accompanied by a recession. If said recession occurs, that bear market usually turns into a -25% to -40% event. For reference, the bear market that preceded the COVID-19 recession was -34%.

Although recessions are a normal part of the business cycle, they are relatively rare. Which means the more common experience is an expansion, and no bear market. Also common is a pullback of less than 20%, even somewhere in the range of -10-15% in any given year.

The average annual correction (pullback of at least 10%, but less than 20%) is -14.3%, and the average amount of time it takes to recover from it is four months. That may sound painful, but looking at data since 1980, the calendar year return on the S&P 500 has been at least seven percentage points above its largest intra-year decline (even if the year still posted a negative return).

Now, the bear markets we’re trying to protect ourselves against are worse—an average pullback of -35.7% and average recovery time of two years and three months.

Clearly, it’s important to avoid fully participating in a bear market. The point is, we can construct portfolios to protect against those large and rare events while learning to live through the smaller bumps. Because in the end, holding on through a non-bear pullback has paid off.

The Best is Yet to Come

It can be tempting to sell when volatility strikes. Even more tempting if other people are doing it. But guess what happens if you sell into a downturn? You lock in the downturn. Depending on the price you paid for the position, you may lock in a loss. That’s useful for offsetting capital gains on tax day, but not useful for building wealth.

It also messes with the diversification of your portfolio that you worked so hard to put in place. If you worked hard to build a well-balanced portfolio, let it work for you in times of stress.

Lastly, and perhaps most importantly, it prevents you from participating in any bounceback that happens after the pullback.

To put some numbers around it, here’s a hypothetical: if you invested $1,000 in the S&P 500 25 years ago and stayed fully invested the entire time, you would have $5,035 today. Conversely, if you got jittery every time there was a -2% or worse daily decline and exited the market, for just one week each time, you’d have cut that gain by more than half and ended up with only $2,144 today.*

Time is on Your Side

There is power in embracing volatility. There is power in time. And for long-term investors, time is on your side. There is power in protecting against bears while riding the bumpy bull. This bull has been uncharacteristically free from bumps, so this column is here to remind you that if it happens, don’t fight it, ride it.

Please Note: Past performance is not a guarantee of future results and an individual investor’s returns may vary over time. Investing comes with risk, including the risk of loss.

COVID-19 Related Port Shutdowns Cause Shipping Delays

Brands, Shippers Brace for More Delays

China’s second-busiest port, the Meishan terminal, was open for business again Wednesday after a two-week shutdown caused by a worker testing positive for COVID-19. The partial closure delayed global shipping which has already been strained since the pandemic. It marks the second time in recent weeks a busy port was shut down due to coronavirus cases.

If more outbreaks occur and shutdowns ensue, it could be problematic for shippers including Maersk (AMKBY) and Hapag-Lloyd (HPGLY), which are anticipating strong US and European demand during the holiday shopping season. Even the congestion caused by the two-week closure at the Meishan terminal is expected to take weeks to ease. Maersk and Hapag-Lloyd overhauled their schedules and warned customers of delays as a result.

Major Brands Anticipate Delays

The global supply-chain kinks are not only expected to impact the shipping industry but also multinational brands including Adidas (ADDYY), Crocs (CROX), and Hasbro (HAS) as the prices for materials and shipping continue to rise. Currently it costs about $11,000 to ship a container to Los Angeles from Shanghai—a 220% increase from a year ago. Increased costs are expected to be passed on to consumers. Meanwhile the World Container Index, which tracks the cost of shipping a container in eight major routes, found rates are up 360% from last year.

All three brands have warned that shipping issues could cause disruptions during the holiday selling season which is an important period for retailers and brands. It could also prevent retailers from restocking their inventory ahead of the holidays, which could blunt sales growth during a pivotal time of the year.

Shipping Delays Won’t Completely Ease This Year

The shipping backups and delays are expected to continue throughout the remainder of the year, potentially easing in the first quarter of 2022. As it stands there are about 36 container ships waiting off the ports of Los Angeles and Long Beach, which is the highest number since February. Typically there would be none or just one anchored shipping container outside the port.

That backlog is expected to reverberate throughout the supply chain, cramping warehouses and weighing on railroad and road capacity. In the US and the UK a lack of truck drivers could make the problem worse. As a result, investors will be paying close attention to see how the supply chain works out the recent delays. Wall Street is watching to see if any more COVID-19 outbreaks cause disruptions which could impact the all-important holiday selling season.