Rent the Runway Falls After Projecting Sales Below Estimates

Rent the Runway Inc. slipped in late trading after reporting a revenue projection that fell short of estimates in its first quarterly earnings since going public, showing that investors remain skeptical of growth at the fashion-subscription company.

  • Rent the Runway sees revenue of as much as $63.3 million in the fiscal fourth quarter — below the average estimate of $66.2 million compiled by Bloomberg from analysts. The company’s third quarter revenue and gross margin outpaced expectations, however.

Key Insights

  • Investors have sold off the shares since Rent the Runway’s initial public offering on ongoing concerns about how much demand there is for fashion rentals in the US. There’s also the thorny question of whether Rent the Runway will become profitable anytime soon — the company reported a net loss of almost $88 million in the quarter ended Oct. 31. About half of the loss was attributed to non-recurring items.
  • Rent the Runway reported 116,833 active subscribers in its fiscal third quarter. That’s 87 percent of what the company had two years ago, before the pandemic struck. It’s also 78 percent higher than a year ago — showing that customers are coming back to the company after the long pandemic pause. The company expects to end the year with 121,000 to 122,000 subscribers.
  • The number of active and paused subscribers totalled 150,075. It’s the first quarter that figure has surpassed pre-Covid numbers, chief executive Jennifer Hyman said in an interview. Users who have paused their accounts “are a strong signal of short-term growth,” Hyman said. “If you didn’t intend to come back, you would have just canceled.”
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Market Reaction

  • Rent the Runway shares fell 4.8 percent at 4:12 p.m. in late New York trading on Wednesday. The stock has declined 45 percent since the company’s Oct. 26 IPO as of Wednesday’s close.

By Jeannette Neumann

Learn more:

Rent the Runway’s Uphill Battle

Shares in the loss-making rental platform fell on their first day of trading. Can the platform convince enough women to try rental fast enough to please investors?

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