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1. Company Snapshot

1.a. Company Description

Rent the Runway, Inc.rents designer wear for women through its stores and online retail.The company offers ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, ski wear, home goods, evening wear, and kids wear, as well as accessories.


It also engages in the software development and support activities.The company was incorporated in 2009 and is headquartered in Brooklyn, New York.

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1.b. Last Insights on RENT

Rent the Runway's recent performance was negatively impacted by disappointing Q2 results, which led to a significant stock plunge. The company's recapitalization plan, announced in August, aimed to strengthen its balance sheet by converting $243 million of debt into common equity and adding $20 million to its balance sheet. However, the plan's benefits may be overshadowed by intense competition, as seen with Urban Outfitters' Nuuly platform gaining traction. Despite efforts to enhance its platform with AI-powered recommendations, the company's growth initiatives face challenges.

1.c. Company Highlights

2. Rent the Runway Delivers Mixed Q1 Results Amid Strategic Transformation

Rent the Runway reported mixed financial results for Q1 2025, with total revenue of $69.6 million, down 7.2% year-over-year. Subscription and rental revenue declined 6.2%, while gross margin contracted to 31.5% due to higher fulfillment costs and revenue share expenses. Adjusted EBITDA turned negative at -$1.3 million, or -1.9% of revenue, compared to $6.5 million, or 8.7% of revenue, in the same quarter last year. The company also reported a net loss per share of -6.58, slightly better than the consensus estimate of -7.43. Free cash flow was negative $6.4 million, reflecting lower profitability and increased inventory investments.

Publication Date: Jun -07

📋 Highlights
  • Record High Active Subscribers: - 147,157 active subscribers, the highest in company history, with stronger customer retention in 4 years.
  • Inventory Expansion Success: - 24% year-over-year inventory volume growth, 36 new brands, and 1,000+ new styles added, driving higher engagement.
  • Improved Customer Retention: - 27%-34% reduction in churn due to personalized styling, customer promise, and concierge services.
  • Stronger Brand Engagement: - 163% increase in social engagement through authentic branding and community efforts like Reddit AMAs and styling events.
  • Financial Performance: - Total revenue of $69.6M, down 7.2% YoY, with gross margin at 31.5% and adjusted EBITDA of -$1.3M, reflecting investments in growth initiatives.

Operational Highlights and Strategic Progress

The company made significant strides in its operational strategy, ending the quarter with 147,157 active subscribers, the highest in its history. Subscriber growth was driven by improved retention, with churn rates declining for both short-term and long-term members. As noted by Jennifer Y. Hyman, CEO, "Our inventory strategy has been transformative. We increased inventory volume by 24% year-over-year, launched 36 new brands, and added over 1,000 new styles." These efforts led to stronger customer engagement, with spring inventory seeing a 23% higher share of views and a 46% increase in "hearts" compared to the prior year.

Customer Engagement and Brand Momentum

Rent the Runway also saw success in its customer engagement initiatives, with social engagement increasing by 163% year-over-year. The company attributed this growth to its new organic strategy, including Reddit AMAs, Instagram Q&A, and member events. Exclusive designs now account for 70% of acquired items, up from 20% in fiscal 2019, highlighting the company's focus on unique offerings. Collaborations with brands like Simon Miller and Ganni further boosted engagement, with the Simon Miller collection generating nearly 3 million views.

Valuation and Outlook

From a valuation standpoint, Rent the Runway trades at a P/S ratio of 0.11 and an EV/EBITDA of 7.57, reflecting the market's cautious optimism about its turnaround efforts. While the company's strategic investments in inventory and customer experience are showing early signs of success, the mixed financial results and high debt levels remain concerns. Management expressed confidence in its ability to continue improving retention and driving subscriber growth, with Q2 revenue guidance of $76 million to $80 million and full-year expectations for double-digit growth in ending active subscribers.

3. NewsRoom

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Rent the Runway to Report Third Quarter 2025 Results on December 12, 2025

Nov -21

Source: globenewswire.com

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Market Today: Nvidia earnings, Ford-Amazon tie-up, Boeing lands mega order

Nov -17

Source: gurufocus.com

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Abercrombie & Fitch (NYSE:ANF) versus Rent the Runway (NASDAQ:RENT) Head to Head Review

Nov -15

Source: defenseworld.net

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Rent the Runway Announces Closing of Recapitalization Transactions

Oct -29

Source: globenewswire.com

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Rent the Runway Adds AI Enhancements Amid Wide-Ranging Business Transformation

Sep -12

Source: pymnts.com

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Rent The Runway, Inc. (RENT) Q2 2025 Earnings Call Transcript

Sep -11

Source: seekingalpha.com

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Rent The Runway Stock Crashes After Q2 Report: Details

Sep -11

Source: benzinga.com

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Rent the Runway to Report Second Quarter 2025 Results on September 11, 2025

Aug -25

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.00%)

6. Segments

Subscription and Reserve Rental

Expected Growth: 5%

Rent the Runway's 5% growth in Subscription and Reserve Rental is driven by increasing demand for sustainable fashion, expansion into new markets, and enhanced customer experience through personalized styling and flexible rental options. Additionally, the rise of experiential spending and growing awareness of the environmental impact of fast fashion contribute to the segment's growth.

Other

Expected Growth: 5%

Rent the Runway's 5% growth is driven by increasing adoption of subscription services, expansion into new markets, and strategic partnerships. The company's focus on sustainability and convenience resonates with environmentally-conscious and fashion-forward consumers. Additionally, investments in technology and logistics have improved operational efficiency, enabling the company to scale effectively.

7. Detailed Products

Unlimited

A monthly subscription service that allows customers to rent up to 4 items at a time, with unlimited exchanges and no late fees.

Update

A 4-day rental service that allows customers to rent up to 4 items at a time, with the option to purchase at a discounted price.

Reserve

A service that allows customers to reserve a specific item for a specific date, ensuring availability for their event or occasion.

RTR Update Membership

A monthly membership that includes 4 rentals per month, with the option to add additional rentals or purchase items at a discounted price.

8. Rent the Runway, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Rent the Runway's subscription-based model and wide range of designer brands make it difficult for customers to find substitutes, reducing the threat of substitutes.

Bargaining Power Of Customers

While customers have some bargaining power due to the availability of alternative fashion rental services, Rent the Runway's strong brand reputation and wide range of designer brands mitigate this power.

Bargaining Power Of Suppliers

Rent the Runway's strong relationships with designer brands and its ability to negotiate favorable terms reduce the bargaining power of suppliers.

Threat Of New Entrants

While there are some barriers to entry, such as building relationships with designer brands and creating a strong logistics network, new entrants could still pose a threat to Rent the Runway's market share.

Intensity Of Rivalry

The fashion rental market is highly competitive, with several players vying for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 152.20%
Debt Cost 3.95%
Equity Weight -52.20%
Equity Cost 6.46%
WACC 2.63%
Leverage -291.58%

11. Quality Control: Rent the Runway, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Victoria's Secret

A-Score: 3.5/10

Value: 5.2

Growth: 3.3

Quality: 3.8

Yield: 0.0

Momentum: 6.5

Volatility: 2.3

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Duluth Holdings

A-Score: 3.5/10

Value: 9.8

Growth: 1.4

Quality: 4.4

Yield: 0.0

Momentum: 4.0

Volatility: 1.3

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Rent the Runway

A-Score: 3.4/10

Value: 10.0

Growth: 4.3

Quality: 5.1

Yield: 0.0

Momentum: 0.5

Volatility: 0.3

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Zumiez

A-Score: 2.9/10

Value: 4.4

Growth: 2.1

Quality: 3.9

Yield: 0.0

Momentum: 4.0

Volatility: 3.0

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Allbirds

A-Score: 2.8/10

Value: 9.4

Growth: 1.4

Quality: 3.9

Yield: 0.0

Momentum: 1.0

Volatility: 1.0

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The Children's Place

A-Score: 2.7/10

Value: 9.8

Growth: 1.0

Quality: 4.5

Yield: 0.0

Momentum: 0.5

Volatility: 0.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

4.93$

Current Price

4.93$

Potential

-0.00%

Expected Cash-Flows