What: Rent the Runway pivots its business model towards resale

Why it is important: for now, resale is a loss-making business for everyone. Will they find a magic solution?

Rent the Runway reported that its Q4 subscription and rental revenue fell 4.4% year-over-year to USD 65.4 million, though total revenue including advertising and resale was flat at USD 75.8 million. The company's active subscribers dipped 1% to 125,954, though total subscribers rose 1% to 173,247. Gross margins contracted to 39.4% from 44.2% the prior year, and operating loss widened 8.4% to USD 19.3 million, though net loss narrowed 5.3% to USD 24.8 million.

For the full year, subscription and rental revenue fell 1.4% to USD 264.9 million, while total revenue was flat at USD 298.2 million. Net loss narrowed to USD 113.2 million from USD 138.7 million.

Rent the Runway has had to contend with revenue declines and financial challenges, leading to a restructuring and layoffs earlier this year. However, the company has made positive moves like hiring a new CMO and overhauling its inventory. Adjustments to inventory procurement have also improved the bottom line.

Looking ahead, Rent the Runway expects revenue growth of 1-6% this fiscal year, with adjusted EBITDA margin of 15-16% and free cash flow breakeven. The company is also focusing on growing its advertising and resale businesses, which it sees as areas with significant potential.

Rent the Runway turns to resale, advertising in renewed growth push