Rent the Runway Turns Its Warehouse Into a Fashion Algorithm

Rent the Runway spent fiscal year 2025 making the biggest inventory bet in its history. More clothes in circulation meant fewer cancellations, stronger retention and a path back to growth. It worked. Now the New York-based clothing rental company is asking a harder question: once subscribers have enough to choose from, how do you help them choose better?

“If 2025 was about inventory acquisition, 2026 is about discovery,” CEO Jennifer Hyman said on the company’s Tuesday (April 14) fourth-quarter and full-year earnings call. “We are working to move beyond the traditional eCommerce grid and leveraging AI technology to deliver the closet of her dreams with more choice and flexibility than ever before.”

AI Moves From the Back End to the Front

The company’s artificial intelligence investments run in two directions. Customer-facing tools are designed to change how subscribers interact with the catalog. Outfit grouping will surface complete looks rather than individual items, eliminating the need to imagine combinations. Product detail pages are being rebuilt to include items across different models, motion-based images and AI-driven fit advice. With conversational search, still in development, the company aims to let subscribers query by occasion or context rather than garment type.

On the operations side, computer vision is being integrated into quality control to detect wear and tear on returned items, with the goal of keeping more units in active rotation for longer and reducing manual labor costs. Machine learning is also being applied to dynamic pricing, a yield-maximization approach that Rent the Runway is now deploying across its inventory pool.

The company also said AI-assisted coding is already accelerating its technical team’s output, allowing features like back-in-stock notifications to ship faster. Hyman described the ambition as giving every subscriber “a stylist in your pocket at all times.”

A Shift in Inventory Economics

The operational pivot comes as the company restructures its inventory acquisition process. In fiscal year 2025, Rent the Runway spent $74.9 million on rental products. That figure is guided down to between $45 million and $50 million in fiscal year 2026, with the gap filled by revenue-share arrangements through its Share by RTR program, in which brand partners supply inventory in exchange for a percentage of rental revenue rather than upfront payment.

New Revenue Streams

Rent the Runway is building adjacent revenue streams designed to extend the value of its logistics infrastructure and subscriber base.

In March, the company launched a marketplace pilot with a subset of loyal subscribers, offering curated shoes, shapewear, basics and beauty products available for outright purchase as well as for rental. The company said 86% of surveyed members expressed interest in buying those complementary items through the platform.

A B2B dry cleaning service launched with one partner in March, representing an early attempt to monetize the company’s cleaning and logistics operations beyond its own subscribers. The advertising business is also expanding, with a 360-degree brand partnership with Air France used as a model for connecting brand partners to what Hyman described as a “high-net-worth customer” at significant life and spending moments.

What Else Stood out on the Call

Inventory-related cancellations fell 7.6% year over year in Q4, a direct output of the fiscal year 2025 inventory strategy that management cited as evidence that selection depth drives retention.

Exclusive design partnerships, in which collections are produced at roughly 40% lower cost than comparable brand inventory, are expanding in fiscal year 2026 as a margin-management tool within the owned-inventory portion of the buy.

The company’s City Ambassador program, launched in October 2025, has scaled to more than 1,000 on-the-ground brand evangelists, alongside a Muse content engine that surpassed 13 million impressions in Q4 alone.

The Muse community content program generated more than 13 million impressions in Q4, and that it is reallocating a significant portion of its paid marketing budget toward organic community channels and answer engine optimization in fiscal year 2026.

Top-Line Results

Rent the Runway reported Q4 fiscal year 2025 revenue of $91.7 million, up 20% year over year, beating consensus of $76.6 million by $15.1 million. Full year fiscal year 2025 revenue came in at $329.8 million, up 7.7% year over year. Ending active subscribers in Q4 were 143,796, up 20.1% year over year, with average active subscribers of 146,356, up 16%. Q1 fiscal year 2026 revenue is guided to between $85 million and $87 million, representing 22% to 25% year-over-year growth.