Jennifer Hyman, Rent the Runway
Scott Mlyn | CNBC
As some consumers assume twice about purchases, Rent the Runway is getting a bump.
The fashion rental and subscription company on Wednesday reported stronger quarterly income that beat expectations and raised its monetary outlook for the 12 months as prospects opted to borrow designer garments as an alternative of shopping for them.
Shares had been up about 23% in after-market buying and selling after closing Wednesday at $1.36.
In a CNBC interview, CEO Jennifer Hyman mentioned inflation is making Rent the Runway extra interesting to a broader swath of consumers who reduce throughout incomes and geographies.
During the quarter, 28% of its subscribers additionally paid extra so as to add at the very least one further rental merchandise every month. Subscribers are charged a payment primarily based on what number of objects they borrow every month.
“There’s no other place that the consumer can go to get as much financial value as she receives from our offering,” Hyman mentioned.
Here’s how the company did for the third-quarter ended Oct. 31 in comparison with what analysts anticipated, in keeping with Refinitiv:
- Loss per share: 56 cents vs. 56 cents anticipated
- Revenue: $77.4 million vs. $72.9 million anticipated
For the quarter, income rose 31% from a 12 months in the past to $77.4 million. Its loss for the interval narrowed to $36.1 million, down from a lack of $87.8 a 12 months in the past.
Its energetic subscribers at the finish of the quarter had been up 15% from a 12 months in the past to 134,240. Total subscribers rose 17% from a 12 months in the past to 176,167.
Rent the Runway now anticipates $72 million to $74 million in the fourth quarter. That vary is larger than the $72 million anticipated by analysts, in keeping with Refinitiv.
For the 12 months, it expects income in the vary of $293 million to $295 million, up from its earlier forecast of $285 million to $290 million.
Rent the Runway is the newest attire enterprise to report earnings, as buyers and economists scour for clues about customers’ willingness to maintain spending. Some retailers, corresponding to Walmart and goal, have warned that consumers are shopping for fewer big-ticket and discretionary objects — together with much less attire — as inflation drives up the costs of meals, housing and different requirements. Others, corresponding to Macy’s and greatest purchasestood by their steerage, however mentioned consumers have change into extra picky and considering sales.
Rent the Runway’s enterprise and its inventory have been on a turbulent experience, particularly throughout the pandemic. The rental platform lets prospects join a subscription to borrow clothes and niknaks or borrow them a la carte. Its enterprise was harm over the previous two years, as customers all of a sudden had fewer causes to get out of their sweatpants and placed on work apparel or get together outfits.
Since debuting on the inventory market final 12 months, shares of Rent the Runway have plummeted. They started buying and selling at $23 a bit.
Rent the Runway can also be nonetheless chasing profitability. It introduced layoffs in September as a part of a cost-cutting plan. It mentioned it will scale back its company headcount by about 24% by the finish of the fourth quarter. The plan will quantity to $25 million to $27 million in annual financial savings, the company mentioned.
The company has examined new approaches to handle its stock, stand out with its merchandise and work with designer manufacturers. In November, it launched its first celeb assortment with Ashley Park, the co-star of Netflix’s “Emily in Paris.” It launched 4 new unique design manufacturers and is on monitor to supply 18 unique design companions this 12 months.
Hyman mentioned Rent the Runway prospects are usually not simply wanting to save cash. They additionally want extra selection of their wardrobes, as they gown up for work, events and on a regular basis outings once more.
“We’re in an environment where people don’t know how many days of the week they’re going to be going into the office, how many occasions they’re going to be going to, how they’re going to be dressing in those occasions,” she mentioned.
Life modifications corresponding to being pregnant are inclined to immediate prospects to subscribe as properly, she mentioned, and many ladies are juggling new routines as they emerge from the pandemic.