Rent the Runway, a leading fashion rental service, has experienced significant growth in recent years and is now targeting a 25% increase in active subscribers. The company’s annual revenue for 2022 reached $296.4 million, marking a 46% increase year-over-year from $203.3 million in 2021. This growth met the company’s ambitious goal of 45 to 50% outlined in 2021. In the fourth quarter alone, revenues rose by 18% to $75.4 million.
The number of active subscribers also increased, reaching 128,586, which represents a 38% increase from 2021. However, CEO and co-founder Jennifer Hyman believes this number is unsatisfactory, attributing the slower growth to price increases during the second quarter. To achieve their target of a 25% increase in active subscribers, Rent the Runway is focusing on improving the customer experience and innovating its services.
One of the key strategies for growth involves shifting from a capital-heavy wholesale model to new models where Rent the Runway shares revenue with brand partners each time an item is worn. Currently, 60% of the company’s inventory is acquired through this method. Additionally, Rent the Runway plans to invest between $69 and $72 million in rental products and focus on inventory freshness.
To enhance the user experience, the company is working on increasing site speed and creating personalized onboarding processes. They have also launched “Rent the Look,” a feature that allows subscribers to rent entire outfits. These improvements are expected to drive subscriber growth and bring the company closer to profitability.
Rent the Runway’s financial performance has been steadily improving, with net losses narrowing to $26.2 million, or 34.7% of revenues, in the fourth quarter of 2022, compared to $39.3 million, or 61.3% of revenues, a year earlier. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $7.1 million, a significant improvement from the losses of $5.5 million in the fourth quarter of 2021.
With a strong focus on customer experience and innovation, Rent the Runway is well-positioned to achieve its target of a 25% increase in active subscribers and continue its impressive growth trajectory.