Rent the Runway (RENT) Q4 2021 loss

Rent the Runway sees the more than 2 million weddings planned for this year, and all the parties that come with them, as being a massive boon to its business.

Plus, according to co-founder and Chief Executive Jennifer Hyman, Rent the Runway is reaping the benefits of consumers seeking value and stability during times of inflation — with Americans seeing higher gas prices, bigger grocery bills and even more expensive price tags on their favorite clothing brands.

To be sure, Rent the Runway is also planning price increases for its membership plans that will take effect in early May, to combat its own higher expenses.

“We’re entering into one of the strongest environments for rental we’ve ever seen,” Hyman said in a Zoom interview. “The inflationary environment is basically a competitive advantage for Rent the Runway.”

On Wednesday, the fashion rental platform reported fiscal fourth-quarter revenue ahead of analysts’ estimates along with a narrower-than-expected loss, as the company won over consumers looking to refresh their wardrobes to adapt to hybrid work schedules and prepare for spring and summer social events.

Shares fell nearly 4% after previously rising about 10% in after-hours trading. The stock has fallen about 31% year to date, bringing Rent the Runway’s valuation to $360 million.

Hyman said Rent the Runway’s business correlates closely with how much consumers are spending on experiences, rather than things. So as people are traveling more, taking Uber rides around town and booking reservations at restaurants, Rent the Runway sees an uptick in users, she said.

Rent the Runway members pay monthly fees ranging from $94 to $235, to receive between four and 16 different items of designer clothing or accessories. Users can tack on additional items to their plans for an extra charge. They can also make one-time rentals for periods of four to eight days. And Rent the Runway gives customers the option to buy items on its website at a discount to full sticker price.

The retailer reported a net loss for the three-month period ended Jan. 31 of $39.3 million, or 62 cents a share, compared with a loss of $38.8 million, or 70 cents per share, a year earlier. That came in narrower than analysts’ estimates for a per-share loss of 70 cents, according to a Refinitiv poll.

Revenue grew about 91% to $64.1 million from $33.5 million a year earlier, topping estimates for $63.2 million.

The company’s fourth-quarter gross margin of 36.7% also came in way ahead of expectations for 27.3%, based on a separate survey by StreetAccount.

Rent the Runway ended the fourth quarter with 115,240 active subscribers, up 110% from year-ago levels. It counted 159,544 total subscribers, including those who have their accounts on pause.

“Fifty percent of our traffic comes to Rent the Runway because [those people] have an upcoming event, or they have an upcoming occasion,” said Hyman. She added the company views this moment in time, coming out of the pandemic, as an “extremely unique window” to acquire new customers and keep them in the business longer term.

To cater to people searching for wedding dresses, for example, Rent the Runway has launched its own wedding concierge service. In its recent marketing, the company is positioning itself as a “value oriented way to get dressed for multiple events,” Hyman said.

For the first quarter of fiscal 2022, Rent the Runway expects sales to be between $63.5 million and $64.5 million, with active subscribers totaling 130,000 to 132,000. Analysts were looking for revenue of $64.3 million, according to Refinitiv.

For the year, the company projects revenue to be in a range of $295 million to $305 million, compared with sales of $203.3 million in fiscal 2021. Analysts had forecast revenue to be $305 million.

Hyman emphasized that, in addition to winning new customers, the company is prioritizing reaching profitability, though the exact timing on that mark remains unclear.

“Profitability is our number one goal,” she said. “And it’s my number one priority as the CEO.”

Find the full financial press release from Rent the Runway here.