Rent the Runway Reveals Red Ink
Rent the Runway’s big IPO reveal painted a picture of a fashion pioneer logging big losses.
The company, one of the first and largest in the fashion rental business, filed confidential paperwork in July with the Securities and Exchange Commission to start the process for an offering.
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That registration statement was made public late Monday, opening the company’s books to the world — showing the potential and pitfalls of making a whole new kind of business in an established industry.
For the year ended Jan. 31, Rent the Runway logged revenues of $157.5 million and net losses of $171.1 million, showing the strain of the pandemic. A year earlier and before COVID-19 hit the U.S., the firm’s revenues totaled $256.9 million with losses of $153.9 million.
The six months ended July 31 showed a kind of stabilization in the business, as revenues fell 9.4 percent to $80.2 million with losses narrowing slightly to $84.7 million.
Rent the Runway acknowledged the losses in the registration statement’s warnings to investors, which typically include almost every ill that can befall a company. Regardless, the accumulated losses stood out even in a period when many companies are coming to market despite logging some red ink during the pandemic.
“As of July 31, 2021, we had an accumulated deficit of $674.1 million,” the company said. “Because we have a short operating history at scale, it is difficult for us to predict our future operating results. We will need to generate and sustain increased revenue and manage our costs to achieve profitability. Even if we do, we may not be able to sustain or increase our profitability.”
Clearly, Rent the Runway is a big idea that’s still coming together and a test case for just how public market investors will prioritize newness and growth and profits in fashion.
In a letter to prospective shareholders, cofounder, chief executive officer and chairperson Jennifer Hyman told how the company started when she went into “full-on big sister mode” trying to get her sister to return an expensive dress for a wedding.
“As I watched Becky model the dress she couldn’t afford, I realized that the traditional closet is indeed dead,” Hyman said. “It’s a museum of the past filled with relics that we no longer wear, that no longer fit us, that cost us a lot of money, and that no longer bring us joy. I asked myself: What if the closet were alive? What if it could adapt and change with us as our size, mood, style and life stage changed? Shouldn’t our clothes express how we feel and who we are today? And what if we just didn’t need so much stuff?”
Those questions launched an idea that has helped reimagine modern fashion.
As the company got its start in 2008, it was viewed skeptically by many brands looking to develop along more established lines. But as the businesses of many smaller designers suffered generally, Rent the Runway became a key buyer, snapping up inventory and exposing brands to a new customer set.
The company now boasts more than 18,000 styles from more than 750 designer brands with about 80 percent of its revenues coming from subscribers.
And it’s coming to market with a multifaceted mission, pushing a new model, touching on sustainability and more.
“I am obsessed with female self-confidence,” Hyman said. “That’s why I founded and have spent the last 13 years building this business. I believe that when women have confidence in themselves, they can change the outcomes of their lives, and they can change the world.”
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