Jennifer Hyman, Rent the Track
Scott Mill | CNBC
As some buyers think twice before buying, Rent the track takes a bump.
The fashion rental and subscription company on Wednesday reported higher quarterly revenue that beat expectations and raised its financial outlook for the year as customers opted to borrow designer clothes instead of buying them.
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The shares were up about 23% after the market closed after closing at $1.36 on Wednesday.
In an interview with CNBC, CEO Jennifer Hyman said inflation makes Rent the Runway more attractive to a wider range of customers who cut across incomes and geographies.
During the quarter, 28% of its subscribers also paid more to add at least one additional rental item each month. Subscribers pay a fee based on the number of items they check out each month.
“There is no other place the consumer can go to get as much financial value as they receive from our offering,” Hyman said.
Here’s how the company fared 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 forecast
For the quarter, revenue increased 31% from a year ago to $77.4 million. Its loss for the period narrowed to $36.1 million, down from a 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 were up 17% from a year ago, 176,167.
Rent the Runway now expects between $72 million and $74 million in the fourth quarter. That range is higher than the $72 million forecast by analysts, according to Refinitiv.
For the year, it expects revenue of between $293 million and $295 million, up from its previous forecast of $285 million to $290 million.
Rent the Runway is the latest clothing company to report profits, as investors and economists search for clues about consumers’ willingness to keep spending. Some retailers, like walmart and Target, warned that shoppers are buying fewer big-ticket and discretionary items – including less clothing – as inflation pushes up the prices of food, housing and other necessities. Others, like Macy’s and best buystuck to their advice, but said buyers have become more demanding and interested in sales.
Rent the Runway’s business and its stock have had a turbulent time, especially during the pandemic. The rental platform allows customers to take out a subscription to borrow clothes and accessories or borrow them à la carte. Its business has been hit over the past two years as consumers suddenly had less reason to take off their sweatpants and change into work clothes or evening wear.
Since its public debut last year, shares of Rent the Runway have fallen. They started trading at $23 apiece.
Rent the Runway is also always looking for profitability. He announced layoffs in September as part of a cost-cutting plan. It announced it would cut its workforce by about 24% by the end of the fourth quarter. The plan will represent between $25 million and $27 million in annual savings, the company said.
The company tested new approaches to managing its inventory, standing out with its merchandise and working with designer brands. In November, she launched her first celebrity collection with Netflix’s “Emily in Paris” co-star Ashley Park. It launched four new exclusive design brands and is on track to offer 18 exclusive design partners this year.
Hyman said Rent the Runway customers aren’t just looking to save money. They also need more variety in their wardrobes as they re-dress for work, parties and everyday outings.
“We’re in an environment where people don’t know how many days of the week they’re going to go to the office, how many occasions they’re going to go, how they’re going to dress on those occasions,” she said. .
Life changes such as pregnancy also tend to prompt customers to subscribe, she said, and many women are juggling new routines as they emerge from the pandemic.
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