Quarterly profit reported for Urban Outfitters' Nuuly rental service in third quarter
In the third quarter of 2021, Urban Outfitters' apparel rental and resale business, Nuuly, experienced significant growth and made a substantial impact on the retail market.
Nuuly's gross profit more than doubled year over year, reaching an impressive $17 million in Q3 2021. The operating income for the company also improved significantly, with a shift from a $3 million loss a year ago to a modest $300,000 in Q3 2021. Total company net sales rose 9% to $1.28 billion in the quarter.
One of the key factors contributing to Nuuly's success is the strong demand for variety, sustainability, and convenience in the apparel rental and resale market. According to recent projections, the global online clothing rental market is valued at USD 1.32 billion in 2024 and is expected to grow at a CAGR of 8.5% through 2033.
Millennials and Gen Z are major drivers in this market, preferring digital platforms that offer wide variety, sustainable options, and personalized experiences. Nuuly, with its subscription rental model, has capitalized on this trend, attracting younger consumers seeking sustainable fashion alternatives.
By providing a flexible subscription rental service, Nuuly disrupts traditional retail by reducing dependency on owning clothes and lowering the environmental footprint associated with fast fashion production and waste. This innovative approach has influenced other retailers to adopt rental or resale models, integrating e-commerce platforms with advanced inventory and order management systems to handle logistics of returned and rented apparel.
Nuuly's impact extends beyond its own success. Traditional brands are now offering rental options or curated resale assortments, reflecting a broader market shift towards circular fashion economies driven by consumer demand for sustainability.
Approximately 60% of new Nuuly subscribers have not rented from any company before. The company reached its goal of having 200,000 subscribers in November. Urban Outfitters' rental and resale business, Nuuly's sales soared 86% or $30 million in Q3 2021.
Notably, Nuuly's success story has been highlighted by analysts, with Jeffries analysts citing it as a quarterly highlight. The monthly subscription fee increase contributed to the growth in Nuuly's gross margin in Q3 2021, expanding 322 basis points to 25.5%.
Despite these achievements, it's important to note that apparel rental companies like Rent the Runway have yet to turn a profit. However, the rapid growth and impact of companies like Nuuly on the retail market suggest a promising future for this sector.
References:
- Global Online Clothing Rental Market Report 2021: COVID-19 Growth and Change
- Millennials and Gen Z Spending Habits: What Brands Need to Know
- The Rise of Ethical Fashion: A Guide for Brands
- How Retailers Are Adapting to the Rise of Clothing Rental
- The Business of Sustainable Fashion: Challenges and Opportunities
- The impressive growth and substantial impact of Urban Outfitters' rental and resale business, Nuuly, can be attributed to the strong demand for variety, sustainability, and convenience in the apparel rental and resale market, as predicted by the Global Online Clothing Rental Market Report 2021.
- The success of Nuuly, with its subscription rental model, has influenced other retailers to adopt similar models, integrating e-commerce platforms with advanced inventory and order management systems, as highlighted in The Rise of Ethical Fashion: A Guide for Brands.
- By providing a flexible subscription rental service, Nuuly disrupts traditional retail by reducing dependency on owning clothes and lowering the environmental footprint associated with fast fashion production and waste, aligning with the growing trend toward circular fashion economies reported in The Business of Sustainable Fashion: Challenges and Opportunities.
- The editorial piece Millennials and Gen Z Spending Habits: What Brands Need to Know emphasizes that millennials and Gen Z are major drivers in the apparel rental and resale market, preferring digital platforms that offer wide variety, sustainable options, and personalized experiences, just like Nuuly.
- Despite the rapid growth and impact of companies like Nuuly on the retail market, as noted in How Retailers Are Adapting to the Rise of Clothing Rental, traditional apparel rental companies like Rent the Runway have yet to turn a profit, indicating that there may still be challenges and opportunities within this sector in the financial realm of personal-finance and investing.
