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Rent the Runway (RENT)
NASDAQ:RENT
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Rent the Runway
(NASDAQ:RENT)
41Neutral
Positive Factors
Revenue Performance
Rent the Runway reported 2Q24 revenue and EBITDA above the high end of guidance while reiterating guidance for breakeven free cash flow for 2024.
Subscriber Growth
Reserve and resale both grew 20%+, indicating positive trends for new subscriber growth.
Negative Factors
Market Potential
The lack of subscriber growth suggests a smaller total addressable market than initially believed at the IPO.
Rent the Runway (RENT) vs. S&P 500 (SPY)
Market Cap
$17.31M
Dividend YieldN/A
Average Volume (3M)74.24K
Price to Earnings (P/E)―
Beta (1Y)1.98
Revenue Growth2.62%
EPS Growth35.21%
CountryUS
Employees938
SectorConsumer Cyclical
Sector Strength52
IndustryApparel - Retail
Share Statistics
EPS (TTM)-22.17
Shares Outstanding3,726,752
10 Day Avg. Volume103,276
30 Day Avg. Volume74,243
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.07
Price to Cash Flow (P/CF)1.10
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$21.00Price Target Upside353.56% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
Rent the Runway Business Overview & Revenue Model
Company DescriptionRent the Runway, Inc. rents designer wear for women through its stores and online retail. The company offers ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, ski wear, home goods, evening wear, and kids wear, as well as accessories. It also engages in the software development and support activities. The company was incorporated in 2009 and is headquartered in Brooklyn, New York.
How the Company Makes MoneyRent the Runway makes money through several key revenue streams. The primary source of revenue is its subscription service, where customers pay a monthly fee for access to a rotating selection of designer clothing and accessories. This model offers different tiers, providing varying levels of access and benefits based on the subscription plan chosen. Additionally, the company generates revenue from one-time rentals, where customers can rent individual items for a set period without a subscription. Rent the Runway also earns from the sale of clothing and accessories, particularly items that have been retired from the rental service. Another significant source of revenue comes from partnerships and collaborations with designers and brands, which can include co-branded collections or exclusive rental offerings. The company's innovative approach to inventory management, logistics, and technology also helps optimize costs and improve profitability.
Rent the Runway Financial Statement Overview
Summary
Rent the Runway faces substantial financial challenges with persistent losses and negative equity. While there are signs of revenue growth and improved operational cash flows, the firm remains highly leveraged with considerable financial risks.Income Statement
Rent the Runway's TTM (Trailing-Twelve-Months) financials indicate significant challenges in profitability. The company reports a negative net profit margin and EBIT margin, reflecting ongoing losses. However, there is a slight improvement in revenue, with a 2.48% growth from the previous annual period. The gross profit margin improved to 51.72% TTM, showing some operational efficiency, though overall profitability remains a concern.35
Negative
Balance Sheet
The balance sheet reveals substantial financial risks, with negative stockholders' equity indicating insolvency concerns. The company's debt-to-equity ratio is not meaningful due to negative equity, and high liabilities compared to assets emphasize financial instability. Return on equity is negative, further highlighting profitability issues.30
Negative
Cash Flow
Cash flow analysis shows some positive trends with operating cash flow turning positive in the TTM period. However, free cash flow remains negative, though it has improved compared to prior periods. The operating cash flow to net income ratio suggests some improvement in cash generation relative to accounting losses.45
Neutral
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 305.60M | 298.20M | 296.40M | 203.30M | 157.50M | 256.90M | Gross Profit |
| 158.10M | 119.70M | 204.20M | 69.70M | -23.50M | 20.60M | EBIT |
| -58.90M | -80.00M | -50.20M | -62.80M | -130.50M | -130.00M | EBITDA |
| 32.50M | 25.70M | -4.70M | -67.20M | -52.20M | -61.60M | Net Income Common Stockholders |
| -81.30M | -113.20M | -138.70M | -211.80M | -171.10M | -153.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 19.93M | 84.00M | 154.50M | 247.60M | 95.30M | 31.40M | Total Assets |
| 64.81M | 278.50M | 336.20M | 447.50M | 320.70M | 275.90M | Total Debt |
| 0.00 | 356.60M | 315.20M | 312.80M | 414.20M | 261.90M | Net Debt |
| -2.44M | 272.60M | 160.70M | 65.20M | 318.90M | 230.50M | Total Liabilities |
| 13.58M | 400.80M | 371.50M | 376.40M | 847.40M | 640.20M | Stockholders Equity |
| 51.23M | -122.30M | -35.30M | 71.10M | -526.70M | -364.30M |
| Cash Flow | Free Cash Flow | ||||
| -22.40M | -98.20M | -118.70M | -83.40M | -121.50M | -199.10M | Operating Cash Flow |
| 3.50M | -15.70M | -47.70M | -42.30M | -42.80M | -37.60M | Investing Cash Flow |
| -35.80M | -54.60M | -44.30M | -22.50M | -58.40M | -138.60M | Financing Cash Flow |
| -500.00K | 700.00K | -4.00M | 215.20M | 168.50M | 177.90M |
Rent the Runway Technical Analysis
Negative
4.63
Price Trends
6.15
Negative
7.80
Negative
10.36
Negative
Market Momentum
-0.34
Negative
44.25
Neutral
8.33
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RENT, the sentiment is Negative. The current price of 4.63 is above the 20-day moving average (MA) of 4.61, below the 50-day MA of 6.15, and below the 200-day MA of 10.36, indicating a neutral trend. The MACD of -0.34 indicates Negative momentum. The RSI at 44.25 is Neutral, neither overbought nor oversold. The STOCH value of 8.33 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RENT.
Rent the Runway Risk Analysis
Rent the Runway disclosed 62 risk factors in its most recent earnings report. Rent the Runway reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rent the Runway Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $13.45B | 37.23 | 101.78% | ― | 6.40% | 891.13% | |
63 Neutral | $5.05B | 20.46 | -39.97% | ― | 2.18% | 5.77% | |
59 Neutral | $12.17B | 11.04 | -1.10% | 3.77% | 1.26% | -19.70% | |
54 Neutral | $169.11M | ― | -4.63% | ― | 4.96% | 55.95% | |
53 Neutral | $418.59M | ― | -34.37% | ― | -13.14% | 44.84% | |
49 Neutral | $599.62M | ― | 32.94% | ― | 9.32% | 25.94% | |
41 Neutral | $17.31M | ― | 47.49% | ― | 2.62% | 35.21% |
* Consumer Cyclical Sector Average
Performance Comparison
RENT
Rent the Runway
4.63
-1.25
-21.26%
ETSY
Etsy
48.53
-16.62
-25.51%
BZUN
Baozun
2.75
0.43
18.53%
SFIX
Stitch Fix
3.32
0.85
34.41%
CHWY
Chewy
33.48
17.71
112.30%
REAL
RealReal
5.57
1.97
54.72%
Rent the Runway Earnings Call Summary
Earnings Call Date: Dec 9, 2024 | % Change Since: -63.88% | Next Earnings Date: Apr 15, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant improvements in debt restructuring and customer experience, coupled with strong brand partnerships and inventory strategy. However, these positives were balanced by challenges in achieving revenue growth and declines in gross margin, leading to a cautious outlook.Highlights
Debt Restructuring and Financial Flexibility
Significant modifications to debt terms: elimination of PIK and cash interest for 6 quarters, reducing interest expense by $66 million, and lowering the minimum liquidity covenant from $50 million to $30 million.
Improved Customer Experience and Loyalty
Increase in subscription Net Promoter Scores to the highest levels since pre-COVID, a 40% reduction in inventory as a reason for churn, and a 50% year-over-year increase in purchase rate.
Enhanced Inventory Strategy
Improved inventory depth by 1.7x in the second half of 2023, leading to a 1,400 basis point increase in in-stock rates compared to Q2, and a 30% increase in hearts on new inventory.
Brand Relationships and Product Offerings
Launch of luxury evening wear category and strong brand partnerships with 50% of first-half 2024 inventory acquired via pay-for-performance.
Lowlights
Flat Revenue and Subscriber Growth
Revenue expected to be flat at around $300 million for 2023, and a decrease in ending active subscribers by 1.9% year-over-year.
Gross Margin Decline
Gross margins decreased to 34.8% in Q3 2023 from 41.1% in Q3 2022, driven by higher rental product costs and increased investment in inventory.
Challenges in Achieving Growth
The business faced a lack of growth in 2023 attributed to inventory depth issues and strategic pullback in customer acquisition.
Company Guidance
During Rent the Runway's Q3 2023 earnings call, the company disclosed significant financial adjustments and strategic plans aimed at stabilizing and growing the business. They announced modifications to their debt terms, eliminating both PIK and cash interest for six quarters starting Q4 2023, thereby reducing total interest expenses by $66 million over this period. The minimum liquidity covenant was lowered from $50 million to $30 million, providing additional financial flexibility. Rent the Runway aims to reach free cash flow breakeven in fiscal year 2024, despite ending Q3 with 131,725 active subscribers and revenue of $72.5 million, a 6.3% year-over-year decrease. The company is focusing on inventory depth improvements, which have already increased in-stock rates by 1,400 basis points from Q2, leading to higher customer satisfaction and retention. Adjusted EBITDA for the quarter was reported at $3.5 million, or 4.8% of revenue, with expectations for fiscal year 2023 revenue to be at or above $296.4 million, maintaining an adjusted EBITDA margin guidance of 7% to 8%.Rent the Runway Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Emil Michael Resigns from Rent the Runway Board
Neutral
Mar 5, 2025
On February 28, 2025, Emil Michael resigned from Rent the Runway’s Board of Directors, effective March 1, 2025, with no disagreements cited regarding company operations. Additionally, on February 27, 2025, the Board’s Compensation Committee approved a cash retention bonus program for fiscal year 2025, aimed at incentivizing executive officers and other eligible participants based on company performance metrics and continued service.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.