Despite significant losses related to the pandemic, Rent the Runway is looking to the future. Earlier this week, the clothing rental company confidentially filed for an initial public offering with the U.S. Securities and Exchange Commission. The company did not specify how many shares they were hoping to offer or the price of those shares. If approved by the SEC, the company will list on the NASDAQ stock exchange under the ticker symbol RENT.
This is a big step forward for the unique brand that boasts more than 18,000 styles, over 750 designer brands, and more than 2.5 million lifetime customers. The company launched in 2008 to provide designer clothing rentals to women who have struggled to find something to wear with styles, seasons and sizes always changing. Rent the Runway filled a niche, and the company and their services have evolved since those early days in co-founder Jennifer Y. Hyman’s New York apartment.
Rent the Runway’s subscription model
Originally started as a clothing rental service, Rent the Runway jumped on the subscription bandwagon. In 2017, the company offered two subscription products – Unlimited which let subscribers rent four items at a time on a constant rotation for $159 a month and Update which let subscribers rent four items from a collection of 200 different brands for an entire month for $89. Customers had the option to buy pieces they really loved. At that time, TechCrunch reported that subscription revenue comprised about half of Rent the Runway’s revenue. In their SEC filing, Rent the Runway reported that 80% of its revenue now comes from subscribers.
As so many subscription services do, Rent the Runway’s subscription program has evolved over time. In addition to its clothing rental and subscription services, for a time, Rent the Runway also had physical retail stores in New York, Chicago, Boston, Washington, D.C., and San Francisco. During the pandemic, Rent the Runway decided to close those stores, with the New York City flagship store serving as a drop-off site, according to CNBC. Other drop box locations were opened in select Nordstrom stores and through other partners. The company continues to support drop-off locations and their online business.
The company currently offers three subscription plans, starting at $69 based on promotional pricing. The Unlimited Swap plan was discontinued in September 2020.
The pandemic took its toll on many retail locations, and Rent the Runway was not immune. Here are company’s financials and subscriber totals for fiscal years 2019 and 2020, per the SEC filing.
|Total subscribers at fiscal year end
|Active subscribers, not including subscribers who paused their subscriptions, at fiscal year end
As of July 31, 2021, subscriber numbers had grown significantly to 126,841 total subscribers and 97,614 active subscribers, not including subscriber who had paused their subscriptions.
“We entered 2020 with momentum behind us, poised for continued growth. We couldn’t have foreseen the global pandemic and the resulting fight for our survival,” Hyman wrote in the SEC filing. “Today, Rent the Runway has emerged stronger: a testament to the resilience, passion and continuous innovation of our people.”
In addition to thanking her thousands of employees, Hyman thanked her customers and subscribers.
“I owe my biggest thanks to our community. Our customers have always been our north star. You’ve made our subscription a beloved everyday ritual in your lives, enthusiastically shared RTR with everyone you know, and transformed rental from a novelty into a celebrated lifestyle,” Hyman said. “…thank you for helping us build the Closet in the Cloud…”
CNBC reports that Rent the Runway was last valued at $750 million.
The pandemic hit the retail clothing market hard, so Rent the Runway was better positioned than most being in a secondhand market as well as diversifying into subscriptions. However, tens of thousands of subscribers paused or canceled their subscriptions temporarily, and clothing styles have changed dramatically with more people looking for less structured, more comfortable work-from-home attire. Add that to Rent the Runway’s triple-digit million-dollar losses, and the company has a tough road ahead. They do have a lot going for them though, and an IPO could help them return to profitability so they can continue their recovery and upward trajectory.