Rent the Runway Inc. — the designer fashion rental pioneer — just celebrated 15 years in business.
And while cofounder, president and chief executive officer Jennifer Hyman told analysts on a conference call on Tuesday that the company is “now operating from steadier financial footing,” it remains a business in the midst of transformation.
Investors would prefer that footing to be a little steadier and sent shares of Rent the Runway down 18.2 percent to $4.41 on Tuesday, leaving it with a market capitalization of $17.1 million.
Rent the Runway’s fourth-quarter net losses narrowed to $13.4 million from $24.8 million a year earlier, while adjusted earnings before interest, taxes, depreciation and amortization rose 55 percent to $17.4 million.
Revenues for the three months ended Jan. 31 inched up 0.8 percent to $76.4 million, although the number of active subscribers at the end of the quarter fell 5 percent to 119,778.
The company has a long history of net losses and has so far racked up more than $1.1 billion in red ink. It also ended the year with $333.7 million in long-term debt on its books, but has been able to stretch its dollars further.
Rent the Runway’s reserves of cash and cash equivalents declined by $6.6 million to $77.4 million in 2024, a dramatic improvement considering the company consumed $70.5 million in cash the year before when it had $154.5 million on hand to begin with.
“We’ve proven that we can operate a sustainable nearly breakeven business,” Hyman said.
“It is now time for Rent the Runway to look to the future,” she said. “Our data over the last five years has led us to believe that an investment in inventory is the greatest lever to unlocking customer growth and supporting customer retention. While we expect that this investment will impact our cash consumption in the year ahead, we believe this is an important investment we need to make for the future success of Rent the Runway.”
This year, the company plans to add twice as many inventory units versus 2024, with a three- to four-times increase from popular brands like Ulla Johnson and Veronica Beard.
“Already customers are feeling the newness,” Hyman said. “The number of new items in her shipment is expected to increase approximately 75 percent this year versus last year. And because we are buying new inventory throughout the year, customers can expect to feel this newness every month and see new styles on our site every week.”
Sid Thacker, chief financial officer, said the company would ramp cash consumption back up to $30 million to $40 million this year.
That will help bring in the new inventory and help drive what’s projected to be a double-digit increase in active subscribers.
“The good news is that we utilize that inventory over multiple years and we believe this year’s inventory investment will continue to pay dividends beyond fiscal year 2025,” Thacker said. “Additionally, our brand partners are willing to provide about 62 percent of these [new inventory] units under Share by RTR arrangements reducing both the risk and cost in fiscal year 2025.”
Already, this year has been a sore test for the fashion rental sector. CaaStle, which has powered a rental business for various retailers, was hit by a scandal when CEO Christine Hunsicker made a quick exit trailed by accusations of doctored financial statements and a company suddenly in the midst of a liquidity crunch.
Between 2011 and 2023, CaaStle raised a total of $520.9 million and had accumulated a deficit of $510.5 million.
