Rent the Runway’s losses narrowed in its fiscal fourth-quarter earnings reported Wednesday because the digital retailer continues to streamline its costs and work toward profitability.
Despite the improvements, the corporate’s fiscal 2023 and first-quarter outlook fell in need of analysts’ estimates. Its share price fell greater than 6% in after-hours trading.
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Here’s how the fashion-rental company performed within the fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Loss per share: 40 cents vs. 51 cents expected
- Revenue: $75.4 million vs. $75.2 million expected
The corporate’s reported net loss for the three-month period that ended January 31 was $26.2 million, or 40 cents per share, compared with a lack of $39.3 million, or 62 cents per share, a yr earlier.
Sales rose to $75.4 million, up 18% from $64.1 million a yr earlier.
In the primary quarter of fiscal 2023, the corporate expects revenue within the range of $72 million to $74 million, lower than the $76.8 million analysts had projected, and an adjusted EBITDA margin of two% to three%.
For the complete yr, the corporate expects revenue within the range of $320 million to $330 million. Analysts had been expecting full-year 2023 revenue of $346 million, in accordance with Refinitiv consensus estimates.
It projects an adjusted EBITDA margin of seven% to eight% and a year-over-year reduction in money spend of just about 50%.
Rent the Runway, which offers subscription services to rent clothes and niknaks and likewise offers the service a la carte, has been charting a path to profitability after a roller coaster couple of years decimated its market cap and sent its share price plunging.
Amid the Covid pandemic, the corporate took a success when consumers suddenly did not have a have to rent clothes and accessories for work and parties. Since then, its subscriber count has rebounded, hitting a record in April after it modified its subscription model.
In March, the corporate permanently added an additional item to each shipment to enhance its value proposition to customers, and as of April 8, the corporate marked 141,205 lively subscribers, the best lively subscriber count the corporate has seen since its inception in 2009. Energetic subscribers excludes those with paused memberships.
“That launch delivered 25% more value to our consumers with minimal impact to our gross margins. So we were capable of deliver value while, , keeping these really financially healthy, gross margins,” Rent the Runway co-founder and CEO Jennifer Hyman told CNBC.
“And we’re seeing a couple of different advantages. We’re seeing first, improvements in loyalty across the client base. We’re seeing improvements in rejoin rates, so people who had churned prior to now are coming back to the business, and we’re seeing improvements in pause reactivations, so individuals who had formerly been in a state of pause are reactivating,” Hyman said.
At the top of the fiscal yr, Rent the Runway had 126,712 lively subscribers, a ten% increase in comparison with the year-ago period. In total, the corporate counted 171,998 subscribers, which incorporates individuals with paused subscriptions. That is an 8% year-over-year increase from the top of the prior fiscal yr.
The corporate expects its lively subscriber count to grow by greater than 25% in the subsequent fiscal yr.
Investors have been watching to see when Rent the Runway will achieve profitability, which Hyman said will come from growing its subscriber base and is only a “stone’s throw away.”
“After we are at 185,000 subscribers, we could have reached free money flow profitability on a maintenance basis and that implies that we will cover all of our fixed costs, variable costs and the associated fee of our inventory to serve those 185,000 subs,” Hyman said.
“Nearly all of our internal company resources are put against improving and innovating the client experience,” she said. “We have already built the infrastructure that we’d like to scale, we built the technology, we built the operations, so now we will put all of our headcount against improving customer experience.”
Also on Wednesday, the corporate announced that Chief Financial Officer Scarlett O’Sullivan will transition out of her role on May 25 and Sid Thacker, a current senior vp, will take over. O’Sullivan will temporarily stay on as an advisor after exiting the role.
Read the complete earnings release here.