Rent a runway losses decreased in revenue for the fourth fiscal quarter he announced on Wednesday as the digital retailer continues to optimize its costs and work towards profitability.
Despite improvements, the company’s outlook for fiscal yr 2023 and the first quarter fell in need of analysts’ estimates. Its stock price fell greater than 6% in off-hours trading.
Here’s how the clothing rental company performed in the fourth quarter versus Wall Street’s predictions, based on an analyst survey conducted by Refinitiv:
- Loss per share: 40 cents versus the expected 51 cents
- Income: USD 75.4 million in comparison with the expected USD 75.2 million
The corporate’s reported net loss for the three-month period ended January 31 was $26.2 million, or 40 cents a share, in comparison with a lack of $39.3 million, or 62 cents a share, a yr earlier.
Sales rose to $75.4 million, up 18% from $64.1 million a yr earlier.
For the first quarter of fiscal 2023, the company expects revenue in the $72 million to $74 million range, lower than analysts’ projections of $76.8 million, and an adjusted EBITDA margin of between 2% and three%.
For the full yr, the company expects revenues in the range of USD 320 million to USD 330 million. In keeping with Refinitiv’s consensus, analysts expected full-year 2023 revenue of $346 million.
It anticipates an adjusted EBITDA margin of seven% to eight% and a year-on-year reduction in money expenses of nearly 50%.
Rent the Runway, which offers subscription services for renting clothes and accessories in addition to offering an a la carte service, is blazing a path to profitability after a roller coaster decimated its market capitalization several years and sent its stock price plummeting.
Amid the Covid pandemic, the company took a success as consumers suddenly had no have to rent clothes and accessories for work and events. Since then, the variety of subscribers has increased, reaching a record in April after changing the subscription model.
In March, the company permanently added an extra item to every shipment to enhance its customer value proposition, and as of April 8, the company marked 141,205 lively subscribers, the highest variety of lively subscribers the company has recorded since its inception in 2009. subscribers doesn’t include individuals with suspended memberships.
“This launch delivered 25% more value to our consumers with minimal impact on our gross margins. So we were in a position to deliver value by maintaining these really financially healthy gross margins,” Rent the Runway co-founder and CEO Jennifer Hyman told CNBC.
“And we see several different advantages. To begin with, we see an improvement in customer loyalty. We’re seeing an improvement in rejoin rates so individuals who left in the past are coming back to the company and we’re seeing an improvement in pausing reactivation so individuals who were previously on a pause are reactivating,” Hyman said.
At the end of the fiscal yr, Rent the Runway had 126,712 lively subscribers, a rise of 10% from the yr before. In total, the company counted 171,998 subscribers, including those with paused subscriptions. This is a rise of 8% year-on-year in comparison with the end of the previous fiscal yr.
The corporate expects lively subscribers to grow greater than 25% in the next fiscal yr.
Investors watched as Rent the Runway broke even, which Hyman said would come from a growing subscriber base and is just “a stone’s throw away.”
“Once we hit 185,000 subscribers, we’ll break free money flow profitability on a maintenance basis, which implies we will cover all of our fixed costs, variable costs and the cost of our inventory to serve those 185,000 subscribers,” Hyman said.
“Most of our internal company resources are dedicated to improving and innovating customer support,” she said. “We have already built the infrastructure we want to scale, we have built the technology, we have built the operations, so now we will focus our entire workforce on improving the customer experience.”
Also on Wednesday, the company announced that CFO Scarlett O’Sullivan would depart her role on May 25, with Sid Thacker, the current senior vice chairman, taking on. O’Sullivan will remain as an advisor on a short lived basis after leaving the role.
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