Thread

Rent the Runway cuts a quarter of its staff as the “hybrid wardrobe” dashes demand for seasonal fits

Wednesday, September 14, 2022 by Robinhood Snacks |

Zoom sweats > Gucci-blazer rental… Rent the Runway is falling out of fashion as more users ditch designer rentals. RTR offers clothes from 800+ designers for one-time rental, monthly membership, and discounted purchase. Last quarter the “shared closet” biz notched record revenue of $76M and shrank its quarterly loss from last year. But that didn’t keep the stock from tanking nearly 40% yesterday.

  • Torn seams: Last quarter, Rent the Runway's active subscribers dropped 8% to 124K as penny-pinching fashionistas paused (or ended) their memberships.
  • Cloudy forecast: RTR lowered its sales expectations for the year and said it planned to lay off a quarter of its 1K+ employees to cut costs.

Hangin’ by a thread… As consumer prices skyrocket, even trendsetters are cutting back on discretionary buys (think: new $2K Moncler puffer). Thanks to the rise of hybrid work, the number of Americans wearing business-formal fits has dropped by half since prepandemic. For companies like RTR that means shifting inventory to include more casual and social fits.

  • Only 20% of RTR subscribers looked for work-related rentals during the first half of the year, down from nearly 35% in 2019.
THE TAKEAWAY

Past performance ≠ future results… Despite RTR’s record quarter, investors tanked the stock because they’re always looking to the future, and the future may not look as bright for retailers. Instead of splurging on new styles every season, consumers are saving by buying fewer outfits that are good for lots of occasions. That shift in shopping patterns is starting to squeeze results for retailers like Target and Amazon.