Rent the Runway unsteady on the catwalk
A mixed bag: Rent the Runway increased its revenues 64% in the second quarter to $76.5 million but ended with a lower active subscriber count than expected.
- Acquisition numbers started strong in April and May but slowed mid-June due to increased subscriber pauses and decreased retention.
- Co-founder and CEO Jennifer Hyman said August and September are back on track.
What’s behind this?
Seasonality. Shoppers in the summer tend to dress more casually as they take vacations or visit the beach.
Remote work. In 2019, over a third of subscriber activity was related or closely related to office wear, but in the first half of 2022, only 20% of clothing worn was work-related.
Making changes: Rent the Runway announced it was cutting nearly a quarter of corporate employees, reorganizing some functions, and reallocating resources to focus on customer experience and growth initiatives.
A sticky ecosystem: Hyman said current initiatives focused on turning one-time renters into habitual customers:
- Testing a loyalty program that enables customers to order one additional item of clothing a month;
- Adding fit tags on product pages to give customers a better idea of items that are likely to fit them;
- Introducing a home pickup option to the app to reduce friction on returns; and
- Partnering with Saks Off 5th to sell pre-worn clothing.
Looking ahead: Shifting consumer behavior makes it difficult to predict how the rest of the year will go.
- Rent the Runway remains cautious: It lowered its full-year guidance, expecting revenues in the range of $285 million to $290 million.
- Coming out of a slow season to a historically more busy one (back to school, winter holiday occasions) may boost sales.
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