Scott Mlyn | CNBC
The fashion rental and subscription company on Wednesday reported stronger quarterly revenue that beat expectations and raised its financial outlook for the year as customers opted to borrow designer clothes instead of buying them.
In a CNBC interview, CEO Jennifer Hyman said inflation is making Rent the Runway more appealing to a broader range of customers who cut across incomes and geographies.
For example, 28% of its subscribers paid more to add one or more rental items on a monthly basis during the quarter. Subscribers are charged a fee based on how many items they borrow each month.
“Rent the Runway’s business model is fundamentally about delivering an enormous amount of financial value to the consumer,” Hyman said. “So there’s no other place that the consumer can go to get as much financial value as she receives from our offering.”
Here’s how the company did for the third-quarter ended Oct. 31 compared to what analysts expected, according to Refinitiv:
- Loss per share: 56 cents vs. 56 cents expected
- Revenue: $77.4 million vs. $72.9 million expected
For the quarter ended Oct. 31, revenue rose 31% from a year ago to $77.4 million. Its loss for the period narrowed to $36.1 million, down from the loss of $87.8 a year ago.
Its active subscribers at the end of the quarter were up 15% from a year ago to 134,240. Total subscribers rose 17% from a year ago 176,167.
Rent the Runway now anticipates $72 million to $74 million in the fourth quarter. That range is higher than the $72 million anticipated by analysts, according to Refinitiv.
It expects revenue in the range of $293 million to $295 million for the year, up from its previous forecast of $285 million to $290 million.
Rent the Runway is the latest apparel business to report earnings, as investors and economists scour for clues about consumers’ willingness to keep spending. Some retailers, such as Walmart and Target, have warned that shoppers are buying fewer big-ticket and discretionary items — including less apparel — as inflation drives up the prices of food, housing and other necessities. Others, such as Macy’s and Best Buy, stood by their guidance, but said shoppers have become more choosy and interested in sales.
Rent the Runway’s business and its stock has been on a turbulent ride, especially during the pandemic. The rental platform lets customers to sign up for a subscription to borrow clothing and accessories or borrow them a la carte. Its business was hurt over the past two years, as consumers suddenly had fewer reasons to get out of their sweatpants and put on work attire or party outfits.
Since debuting on the stock market last year, shares of Rent the Runway have plummeted. They began trading at $23 a piece. Its shares closed Wednesday at $1.36.
Rent the Runway is also still chasing profitability. It announced layoffs in September as part of a cost-cutting plan. It said it would reduce its corporate headcount by about 24% by the end of the fourth quarter. The plan will amount to $25 million to $27 million in annual savings, the company said.
This story is developing. Please check back for updates.