Rent the Runway Targets 25% Increase in Active Subscribers
Jennifer Hyman has been busy at Rent the Runway Inc., cutting costs, refinancing debt and, finally, sweetening the service.
Now the payoff might just be starting to come with some signs of traction in the company’s fourth-quarter update.
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“The major headline for 2022 is just, we made Rent the Runway a financially stronger business,” Hyman, chief executive officer and cofounder, told WWD. “We’re at a point now where our gross margins are healthy, our cost structure is right-sized, inventory acquisition is efficient, and 2023 is the year where we are going to make significant progress towards profitability.”
Fashion rental service ended its fiscal year on Jan. 31 with 126,712 active subscribers, a 10 percent annual increase.
But Hyman and the company are looking to grow much faster — and already added another 11.4 percent to its base as of Saturday, hitting a record high of 141,205 active subscribers.
Now the firm is projecting a total increase of 25 percent this year, putting it on course to end 2023 with over 158,000 active subscribers.
Hyman noted that the higher subscriber base foreseen by year’s end would generate another $20 million in cash to fund growth and that, at 185,000 subscribers, the company would be cash-flow break-even on a maintenance basis.
“That is not far away,” she said.
To get there, Hyman is looking to continue to make Rent the Runway better for its users.
Last month the rental pioneer started giving the majority of its subscribers 10 looks a month instead of eight at the same price. It also recently introduced a Shop the Look feature that helps subscribers put together full outfits and sped up the website, amid other tweaks.
“We’re seeing really nice momentum coming out of the extra item launch,” Hyman said. “And I think if you look beyond just the metrics, we’re seeing that the customer is excited, she’s engaging more, our traffic is up. She is excited about the fact that Rent the Runway is going to be delivering more value to her throughout the year and is focused on improving her experience.”
The company has been making big changes on the back end as well, laying off 24 percent of its corporate workforce in September and cutting annual operating costs by $25 million to $27 million.
“Because we’ve built this really scalable infrastructure for the company, because the business is in a great place financially in 2023, we’ve been able to take the majority of our company resources and put them towards innovation for the customer experience,” Hyman said. “We have most of the people at this company focused on, How do we improve and innovate how customers experience Rent the Runway? And we believe that the way that we get to profitability is by growing our subscriber count.”
In the fourth quarter, Rent the Runway’s net losses narrowed to $26.2 million, or 34.7 percent of revenues, from $39.3 million, or 61.3 percent of revenues, a year earlier.
Adjusted earnings before interest, taxes, depreciation and amortization tallied $7.1 million and compared with losses of $5.5 million on the same basis in the fourth quarter of 2021.
Revenues for the three months ended Jan. 31 increased 17.6 percent to $75.4 million.
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