Rent the Runway rebounds as consumers shop for bargains
Rent the Runway reported a more than 30% increase in sales. Shoppers here look through racks during the launch of Rent the Runway's West Coast flagship store on May 08
By Paul R. La Monica, CNN
A recession may be coming, but consumers still want to look fashionable. Subscription clothing service Rent the Runway reported a more than 30% increase in sales for the third quarter after the closing bell Wednesday.
Shares of Rent the Runway soared 60% on the news. But the company is still not exactly a picture of financial health, posting a net loss of $36.1 million last quarter.
One top Wall Street analyst was impressed with Rent the Runway’s earnings.
Goldman Sachs analyst Eric Sheridan called the company “the leader in the subscription-based effort to drive the adoption of the sharing economy theme in the apparel sector.” Sheridan reiterated his “buy” rating on the stock as well as his price target of $6, which is nearly triple the current stock price of about $2.18.
But Rent the Runway’s stock has plunged nearly 75% this year, even after accounting for the recent gains. The company announced a restructuring in September, laying off 24% of its staff in the process.
“As we pointed out last quarter, the macroeconomic environment remains tough and has had an impact on our business,” said Rent the Runway chief financial officer Scarlett O’Sullivan on a conference call with analysts Wednesday.
Still, the company is hopeful for a quick turnaround, and Rent the Runway is planning to offer even more clothing available for rent to its more than 175,000 subscribers.
“We are choosing to be opportunistic and take advantage of the current retail slowdown to buy attractive inventory from our brand partners at discounted prices,” O’Sullivan said on the conference call.
But Rent the Runway rival Stitch Fix is also hurting. The company reported a bigger-than-expected loss on Tuesday and sales that missed forecasts. It also announced layoffs in June. The stock is down 80% this year, but shares rose 5% Thursday thanks to the solid Rent the Runway results.
The-CNN-Wire
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