Rent The Runway Stock Crashes on Deepening Q2 Losses
Despite beating revenue estimates and growing subscribers, the fashion rental firm's widening net loss and declining margins triggered a sharp after-hours sell-off.
Rent The Runway (NASDAQ: RENT) saw its shares plummet in after-hours trading Wednesday after the company posted a wider-than-expected loss for the second quarter, overshadowing strong revenue growth and a significant increase in its subscriber base.
The fashion rental platform reported a , missing Wall Street's consensus estimate of a $5.48 loss. The news sent the stock tumbling by more than 15% in after-hours trading, as investors reacted to the deepening profitability concerns.
The sell-off came despite the company reporting quarterly revenue of $80.9 million, a 2.5% year-over-year increase that beat the analyst consensus of $75.50 million. Rent The Runway also announced that its active subscriber count grew by 13.4% year-over-year to 146,373, meeting a key growth target. However, the top-line performance was not enough to allay fears over the company's bottom line.
The company's profitability metrics showed significant strain. Gross profit fell by 25% to $24.3 million, with the gross margin contracting to 30.0% from 41.1% in the same period last year. The decline was attributed to higher costs associated with a rapid expansion of its inventory and increased fulfillment expenses. Adjusted EBITDA also saw a steep drop to $3.6 million, down from $13.7 million in the prior year, as .
In a move to shore up its financial position, Rent The Runway also announced a transformative recapitalization plan. The plan aims to from over $340 million to approximately $120 million and extend its debt maturity to 2029. While this strategic move is designed to provide greater financial flexibility, the market's immediate focus remained squarely on the company's ongoing struggle to achieve profitability.