Rent the Runway Regains Some Momentum With Sales, EBITDA Gains
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Rent the Runway Inc. got a little bit of its groove back.
The rental pioneer — which saw a summer slowdown and laid off 24 percent of its corporate employees in September — on Wednesday posted third-quarter gains and boosted its outlook for the year.
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Net losses for the quarter narrowed to $36.1 million from $87.8 million a year ago, with the most recent period including $5.8 million in restructuring charges. Adjusted earnings before interest, taxes, depreciation and amortization tallied $6.6 million, up from losses of $5.6 million on the same basis a year ago.
Revenues for the three months ended Oct. 31 increased 31.2 percent to $77.4 million from $59 million.
Rent the Runway’s active subscriber count rose 15 percent to 134,240.
“Rent the Runway is really resonating with our target customer despite the uncertain macroeconomic environment that we’re in right now,” said Jennifer Hyman, chief executive officer and cofounder of Rent the Runway Inc., in a WWD interview.
Hyman pointed to gross margins — which stood at 41 percent in the quarter, up from 34 percent a year earlier — as “significantly better than most other retailers in our space.”
But Hyman and Rent the Runway still have to prove themselves to investors, who are looking to see if the innovative company that went public last fall can turn its model into a financial powerhouse.
Just before the results were released, shares of the company were trading at about $1.36 — down from more than $24 shortly after its initial public offering in October 2021 — with a market capitalization of just $83.1 million. But investors took heart from the quarter and the outlook and sent shares of the company up 23.5 percent to $1.68 in after-hours trading.
Consumers showed some reticence over the summer and now that more data has come in, Hyman attributed that largely to a roughly 5 percent price increase Rent the Runway pushed through in April.
“There’s been a kind of normalization post price increase,” said Hyman, noting that there’s less churn in the customer base and fewer pauses on the subscription service.
Going forward, more of the impact from the company’s cost cuts and restructuring are expected to flow through into the financial statements.
Rent the Runway’s rank and file have also adjusted to the reset at the company, she said.
“The employee mood and moral score is substantially back to where it was before the restructuring,” Hyman said. “How I gauge the success of something like a restructuring is the engagement of our team.”
The company has continued to roll out new initiatives.
Its first celebrity collection launched in November, featuring Ashley Park, costar of Netflix’s “Emily in Paris.” Four new exclusive design brands — Atlein, Ronny Kobo, Marina Moscone and Toccin — bowed this fall.
Rent the Runway is also working on a pilot to wholesale its exclusive design products to an undisclosed third-party retailer. The looks sold will be new, not from the rental inventory.
“This is the first time another multi-brand retailer has purchased these exclusive design products from us,” Hyman said. “It showcases the consumer appeal and the demand for our exclusive design outside Rent the Runway.
“It’s too early to say how the pilot’s going to evolve, but we believe it really highlights the power of our data and the power of our platform and the monetization opportunity that exists with our exclusive designs that are now 30 percent of our inventory,” she said.
While many fashion companies came into the year projecting strength and had to repeatedly warn of weaker results, Rent the Runway has been running countertrend in terms of profits.
The company is now projecting an adjusted EBITDA margin of 1 percent this year, up from the forecast in September, calling for a decline of 2 percent to a flat performance, and better than the outlook in June, which pointed to a 5 to 6 percent decline.
