Quick Take:
- Fashion rental giant Rent the Runway (RENT) made its Nasdaq debut on Wednesday, increasing its initial offering to 17 million shares and pricing at the top of its range at $21 per share.
- The company has seen a turbulent year with the pandemic decimating demand for apparel, prompting a shift in strategy to expand its resale platform to non-subscribers.
The Deets:
Financial details remain confidential as Rent the Runway expands its Initial Public Offering (IPO) offer
Since its inception a decade ago, Rent the Runway has been rather secretive about its financials and subscriber base, choosing to focus on growth in the face of steep competition in the fashion industry. The limited data that has been released, mainly from the pandemic-stricken period, paints a picture of a company plagued by recurring losses and declining subscriber numbers.
According to the company's prospectus, Rent the Runway has always been in the red, despite steady growth in active and total subscribers over the past year. In 2020, the company boasted nearly 55,000 active subscribers, a significant drop from the 133,000 it had in 2019. Revenue fell a whopping 39% to $157.5 million, with net losses ballooning to $171.1 million from $153.9 million in the previous year.
The first half of 2021 has seen a tentative recovery for Rent the Runway, with total subscribers edging up to around 127,000 from about 109,000 in the same period last year. Revenue reached just $80.2 million, a descent from $88.5 million in the first half of 2019, but net losses narrowed to $84.7 million compared to $88 million in the same period the previous year.
However, the picture before 2019 remains shrouded in mystery, leaving analysts like MKM Partners' Roxanne Meyer scratching their heads. "The abbreviated financial history (with over half impacted by the pandemic) doesn't allow us to gauge the extent of growth prior to 2019," Meyer notes. "With no pre-2019 subscriber data, it is hard to predict what normal growth rates might be."
Backstory:
Founded in 2009 by Jenny Fleiss and Jenn Hyman, Rent the Runway set out to revolutionize the fashion world by offering an affordable alternative to purchasing high-end designer clothing. The concept caught on like wildfire, and the company grew rapidly without revealing its early financials. By 2018, Rent the Runway boasted $85 million in revenue, signalling a strong growth trajectory.
Beyond clothing, Rent the Runway branched out into accessories like earrings, handbags, and necklaces to further diversify its offerings. The company also introduced a subscription service that allowed customers to rent multiple items per month, adding another layer of engagement and boosting revenue.
However, scaling operations and managing inventory were challenges that the company faced as it grew exponentially. Its unique offering of designer clothing at a fraction of the retail price proved to be a major driver of growth, drawing in customers seeking affordable luxury.
In short, Rent the Runway's historical financial performance before 2019 was characterized by robust growth, bolstered by a groundbreaking business model and expanding customer base. While detailed annual revenue figures for each year before 2019 are scarce, the company's rapid expansion suggests a promising past.
- AI-driven financial analysis might provide insights into Rent the Runway's historical performance, as limited data is available before 2019, causing analysts like Roxanne Meyer to struggle with predicting normal growth rates.
- Despite the pandemic causing a decline in business and finance for Rent the Runway, investments in expanding the resale platform to non-subscribers could potentially lead to future growth and stability.
- In the realm of fashion investing, Rent the Runway's IPO priced at $21 per share marks a significant milestone, demonstrating investor confidence in the company's potential for recovery and growth post-pandemic.
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