Rent the Runway (NASDAQ:RENT) seems to be benefiting from macro challenges as many customers are borrowing designer wear instead of purchasing them amid high inflation. The fashion rental company posted better-than-anticipated Q3 revenue and raised the full-year outlook backed by strong Q4 expectations. RENT stock surged nearly 14% in Thursday’s pre-market session as of writing.
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The company’s Q3 revenue increased 31% to $77.4 million, driven by higher spending by the subscribers. The company witnessed solid average revenue per user (ARPU), as 28% of its subscribers paid more to add at least one additional rental item each month. Loss per share narrowed significantly to $0.56 from $6.72 in the prior-year quarter. Analysts were expecting a loss of $0.56 per share on revenue of $73.3 million.
Rent the Runway ended the quarter with 134,240 active subscribers, up 15% year-over-year. Meanwhile, total subscribers increased 17% to 176,167. The company is taking several initiatives to expand its subscriber base, including adding celebrity collections and new exclusive design brands.
Solid Outlook
The company expects Q4 revenue in the range of $72 million to $74 million and an adjusted EBITDA margin of 4% to 5%. Furthermore, it raised its full-year revenue outlook to the range of $293 million to $295 million from the previous guidance range of $285 million to $290 million. Analysts projected Q4 revenue of $71.8 million and full-year revenue of $288.2 million.
Rent the Runway is reducing its costs and focusing on improving its productivity. In September, the company announced that it would layoffs nearly one-fourth of its workforce. It expects the restructuring efforts to reduce operating expenses by $25 million to $27 million in Fiscal 2023 and substantially bring down its cash burn.
Is Rent the Runway a Buy?
Rent the Runway scores a Strong Buy consensus rating based on seven Buys and two Holds. The average RENT stock price target of $6.06 implies 346% upside potential. Shares have tumbled over 84% year-to-date.
