In the company’s first quarterly report since going public in October, Rent the Runway executives said they see massive opportunities for customer acquisition in the coming years as well as potential to move beyond clothing and accessories, even as subscriber counts remain deflated versus pre-pandemic levels.
Jennifer Hyman, co-founder and CEO of Rent the Runway, said 91% of women have purchased or are open to purchasing secondhand clothing, and 56% of women believe they will subscribe to fashion over the next five years, which amounts to an opportunity set of 21 million women in the U.S. Rent the Runway needs only to capture about 3.5% of these potential customers to quintuple its current subscriber base, she told analysts.
“We are excited about the significant opportunity ahead, because we believe that women care about making more sustainable choices, want to experience more variety and own less, want more convenience, and care about financial value,” she said on a conference call.
And having built an “operating system to power the sharing economy of physical goods,” Hyman said it’s possible that Rent the Runway’s proprietary technology could be used beyond fashion. “While we’re focused on clothes and accessories today, we see our platform as being extendable to many other categories over the medium term,” she added.
Rent the Runway said it had just over 116,800 active subscribers at the end of October, an increase of 78% compared to the same period last year, and representing 87% of the active subscribers the company had at the end of the 2019 fiscal year. For the three months that ended Oct. 31, Rent the Runway reported $59 million of revenue, a 66% year-over-year increase.
Despite the fact that overall customer levels have yet to return to pre-pandemic levels, Hyman noted that New York, Washington, D.C. and San Francisco are the only metro areas currently below 90% of pre-COVID subscriber counts, and markets in the South Atlantic, South and Mountain regions are “significantly higher than pre-COVID.”
“We believe we’re seeing clear indications that our customers have adapted to a new hybrid world in which COVID is still present, but fashion is as important as ever,” Hyman said.
Prior to the pandemic, work clothes were a major reason that consumers used Rent the Runway, the CEO noted — and even with work-from-home now the norm for many people, work has returned to 25% of the use cases.
“She’s still renting, she wants to look great and present herself well, even in the context of working from home,” Hyman said. “So, I think this is even more of a symbol of how she is adjusting to the hybrid world.”
Hyman added that 25% of rentals in the third quarter were special occasion pieces, even though the continuing threat of COVID-19 has meant fewer occasions.
Still, the company is trying to make it easier for customers to access and then return pieces on their schedule, recently launching at-home pickup in five major metro areas. Hyman said this has resulted in lower shipping costs and an easier way for customers to return orders, with over one-third of customers in initial markets for this feature adopting it.
For the fourth quarter, which started Nov. 1, Rent the Runway expects active subscribers to top 121,000 and revenue around $63 million; for the full fiscal year, revenue is expected to be just over $202 million.
Chief Financial Officer Scarlett O’Sullivan said, though, that the holiday season will likely be slower this year than pre-pandemic because of the lack of large holiday events, travel and parties. “We obviously are still showing growth for Q4, but likely not as much as we would have seen if more of the large-scale events were happening,” she told analysts.