Rent the Runway narrows losses as it reports a record high in active subscribers
Rent the Runway is gradually making a comeback after slow growth over the last couple of years.
On Wednesday, the rental service reported its 2023 first-quarter earnings, posting improved revenue and narrowing losses.
Quarterly revenue was $74.2 million, a 10.6% increase year-over-year from $67.1 million — with active subscribers hitting a record high of 145,220, up from 134,998 during the same period last year and above pre-pandemic numbers. Rent the Runway’s losses came in at $30.1 million, an improvement compared to losses of $42.5 million during the same time last year.
Still, Rent the Runway faces myriad challenges. Despite the improved financials, the company still has a long road ahead in achieving its profitability goals. And while interest in rentals remains high, particularly amid inflation, inventory availability remains a challenge as some highly-coveted items are quickly rented out and hard for all subscribers to access. In order to keep subscribers happy, Rent the Runway is focused on investing in a new suite of tools to enhance the delivery and customer service experience, like a text-based concierge service, as well as tech to improve search results and recommendations.
“Given our financial transformation over the past several years, we believe we are in a strong position to invest the majority of resources into our strategy of improving the customer experience,” co-founder and CEO Jennifer Hyman said in the earnings release. She went on to say that over the next few quarters, the company will try “delivering for our customers in the quarters to come while working towards our subscriber growth and profitability goals.”
Jessica Ramirez, a senior research analyst at Jane Hali and Associates, said that Rent the Runway has been making improvements in attracting new subscribers. “But they’re up against weak figures from the past few years,” she explained.
Overall, Rent the Runway says it’s prioritizing customer focused initiatives during 2023.
According to Rent the Runway, merchandising improvement is on the way in the back half of the year. “Inventory availability continues to be a top priority,” said Hyman on Wednesday’s call.
During the earnings call, Hyman pointed to “Rent the Look,” which launched in March and lets customers find an entire outfit. This feature, according to Hyman, has been a helpful substitute when people hit a page with an unavailable item. The company is also making updates to its website and app, and started leveraging AI to improve product search and discovery.
Michael Brown, partner and Americas retail leader at Kearney, said that in fashioning its comeback, Rent the Runway still has more work to do when it comes to inventory management.
“It’s tough to pull off, but maintaining a diversified inventory will help them appeal to a broader swath of consumers,” Brown said. He also suggested that Rent the Runway take advantage of the ongoing inventory surplus — and collaborate with fashion brands to source fresh merchandise.
Ramirez said that while Rent the Runway is making strides when it comes to the customer experience, subscribers are only going to stick around if they are be able to rent their most-wanted pieces. She pointed to some convenience-based updates — like a text-based concierge service and at-home pickup as a plus — adding that Rent the Runway is doing a good job in making the digital rental process more seamless.
That being said, “assortment remains a weak point for customers looking for seasonal and events-driven outfits,” she said.