After doubling revenues and subscribers last quarter, the nation’s leading designer clothing rental platform is aiming to do so again, saying the surge in inflation, combined with a spike in upcoming special events, will drive the value case for not purchasing new outfits.
In speaking with investors and analysts after reporting Q4 results that topped Wall Street expectations, Rent the Runway CEO Jennifer Hyman said the 12-year-old company she co-founded 12 years ago has long waited for an environment like this.
“2022 is expected to be a banner year for special events and we plan to capitalize on it,” Hyman said on the call. “We think that there will be unprecedented demand for going-out clothes and event dressing this year with 2.6 million weddings planned and new office wardrobes and closets that need a serious refresh after two years at home,” she added, calling the platform’s current value proposition “extremely attractive.”
For the three months that ended Jan. 31, the Brooklyn-based site said its revenues rose 91% while its active subscribers rose 110% to finish the quarter and fiscal year at 115,000.
Going forward, RTR’s executive team said the current macroeconomic environment was one of the strongest the niche company has seen in years, and that when combined with an “outsized pipeline of weddings, social occasions, return to work and a resurgence of general social activity,” that its current quarter and full-year outlooks were positive.
“This momentum continues to carry over into fiscal year 2022, where we are on track to achieve 77% year-over-year growth in Active Subscribers at the end of Q1,” CFO Scarlett O’Sullivan said, “and we plan 45%-50% y/y revenue growth in fiscal year 2022.”
Big Opp, Smaller Company
Since RTR’s initial public offering, (IPO) in late October, shares of the alternative retailing player have fallen 70% in less than six months, far worse than the 17% drop of the S&P Retail Index or the 3% slip by the S&P 500 and left the money-losing venture with a market value of about $500 million.
Although the tailwinds, trends and outlook are positive, investors are clearly growing impatient with the firm and hungry to see continued growth and progress to profitability.
To that point, RTR said early results from its new at-home pickup service were not only saving the company money on shipping but being warmly embraced by customers too.
“We launched at-home pickup in nine markets covering a-quarter of our subscriber base,” Hyman said. “[It] is less expensive than shipping with a national carrier, and it greatly improves the customer experience by dramatically simplifying the returns process.”
The challenge, or opportunity, that RTR faces is turning one-time wedding customers into ongoing subscribers, where Hyman said 50% of the company’s traffic currently comes to the site for an upcoming occasion.
As such, Hyman said the company’s marketing efforts will be “leaning into” the value proposition more deeply to better position its subscription efforts.
“Inflation for us is a competitive advantage, because it actually increases the value that the subscriber is getting from Rent the Runway,” Hyman said, noting that a typical subscriber paying $140 per month was getting over 20x of value by receiving $4,000 worth of designer product.
“And as cost of products are going up, [customers are] seeing even more value, which is why we’ve seen higher geographic diversity in our subscriber base, higher age diversity, and we anticipate that continuing,” Hyman predicted.
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