Rent the Runway Q1 2026 Earnings Report

Rent the Runway EPS Results

• Actual EPS: -$6.58
• Consensus EPS: -$7.43
• Beat/Miss: Beat by +$0.85
• One Year Ago EPS: N/A

Rent the Runway Revenue Results

• Actual Revenue: $69.60 million
• Expected Revenue: $68.70 million
• Beat/Miss: Beat by +$900.00 thousand
• YoY Revenue Growth: N/A

Rent the Runway Announcement Details

• Quarter: Q1 2026
• Date: 6/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, June 5, 2025
• Conference Call Time: 4:30PM ET

Rent the Runway (NASDAQ:RENT) operates shared designer closet in the United States. The company offers evening wear and accessories, ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, and ski wear under subscription, rental, and resale offering. It also engages in the software development and support activities. Rent the Runway, Inc. was incorporated in 2009 and is headquartered in Brooklyn, New York.

Rent the Runway Q1 2026 Earnings Call Transcript

Key Takeaways

• Rent the Runway ended Q1 with over 147,000 active subscribers, marking the highest quarter-end subscriber count in company history and achieving its strongest customer retention in four years.
• The company executed its largest ever investment in new inventory, with Q1 volume up 24% year-over-year, launching 36 new brands and over 1,000 styles, driving a 23% lift in views, 46% more hearts, and a 14% higher love rate.
• Several product innovations—such as back in stock notifications, personalized styling sessions, and a 60-day customer promise—have significantly reduced churn, with reductions up to 34% for engaged subscribers.
• Q1 revenue fell 7.2% year-over-year to $69.6 million and gross margin contracted to 31.5% from 37.9%, while adjusted EBITDA swung to a $1.3 million loss compared to a $6.5 million profit last year.
• For Q2, the company expects revenue of $76 million–$80 million and maintains full-year guidance of double-digit subscriber growth, while planning free cash flow consumption of $30 million–$40 million as it continues investing in its customer proposition.

Presentation

[Operator]

Greetings, and welcome to the Rent the Runways Quarter One twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. And as a reminder, this call is being recorded. It is now my pleasure to introduce Kara Schrimby, Chief Legal Officer. Thank you, Kara. You may begin.

[Cara Schembri, Chief Legal & Administrative Officer at Rent the Runway]

Hello, everyone, and thanks for joining us today. During this call, we will make references to our Q1 twenty twenty five earnings presentation, which can be found in the Events and Presentations section of our Investor Relations website. Before we begin, we would like to remind you that this call will include forward looking statements. These statements include guidance and underlying assumptions for the second fiscal quarter of twenty twenty five and fiscal year twenty twenty five and statements regarding the impact of our business strategies and plans, our ability to drive subscriber growth and customer loyalty in a cost efficient manner and our planned increases in inventory. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially.

[Cara Schembri, Chief Legal & Administrative Officer at Rent the Runway]

These risks, uncertainties and assumptions are detailed in today's press release as well as our filings with the SEC, including our Form 10 Q that we plan to file in the coming days. We have no obligation to update any forward looking statements or information except as required by law. During this call, we will also reference certain non GAAP financial information. The presentation of this non GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non GAAP measures can be found in our press release, slide presentation posted on our investor website and in our SEC filings. And with that, I'll turn it over to Jen.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Thank you, Kara, and thank you all for joining today. On our last earnings call, we walked you through our plan to transform Rent the Runway as we increase the breadth and depth of our inventory, innovate on our product to give customers what they want, and get back to our customer obsessed roots. In the past quarter, we've put this plan into action and we've seen very positive results. We drastically increased the desirability and quantity of inventory on the platform with much more to come, launched some of the most highly requested features from our members, including back in stock notifications and a customer promise for new and rejoining subscribers, and restored our relationship with customers through a revitalized authentic approach to organic social and customer service.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

And as I speak with you today, I'm happy to report that our transformation strategy is working. We've seen a return to subscriber growth in Q1, ending the quarter with over 147,000 active subscribers, the most ending subscribers at the end of a quarter in company history. We've also seen the strongest quarterly customer retention in four years, with improved churn rates for both early term and long term subscribers. Today, I'll walk through our strategy and the results we're seeing in more detail as we show our community and the world that Rent the Runway is back. First and foremost, our bold inventory strategy.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Rent the Runway provides our customers with a valuable offering, a risk free way to try new styles and brands that may have previously not been on their radar or in their closets. This ability to discover newness is a key reason why so many women love our service. And with the rejuvenated inventory this year, we're giving her an even greater opportunity to discover new brands and items that she loves. As we detailed on our last earnings call, we are planning our largest ever investment in new inventory this year. Our new brands and styles have already started to roll out on our site and into the hands of our customers.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Throughout this transformation, we have been guided by our customer feedback and data so that we can be more specific about the aesthetic of the styles we offer on Rent the Runway, with the ultimate goal of attracting new customers and retaining existing customers. We've been focused on building an assortment that resonates with our feminine, polished, and playful core customer. And we're building depth across categories that we know our customers desire, like denim, outerwear, day dresses, casual everyday clothing, handbags, and workwear. I truly believe that we've not only created visual differentiation between us and our competitors, but we're also well on our way to significantly improving customer loyalty. Q1 inventory volume received was up 24% year over year.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We launched 36 new brands and over 1,000 new styles that align with what we know our customer is looking for. And we've been right. Our customers are more engaged with our selection than ever before. Our spring twenty twenty five inventory has 23% higher share of views, 46% more hearts, and a 14% higher love rate than our spring buy last year. She is also adding more to her shipment with April add on gross bookings up 11% year over year.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We've identified several pillar brands like Veronica Beard, ALC, Ola Johnson, and Stodd, which drive a higher perception of the value of Rent the Runway when a customer has one of them in her order. To double down on these pillar brands, we've considerably increased our buys from them. We've also released four new collaborations with Sea New York, Plan C, Ghani, and Simon Miller, and they are leading the way in customer engagement. The new Simon Miller collection alone drove almost 3,000,000 views. And from a cost perspective, I want to remind you that these collections deliver comparable quality at approximately 40% lower cost on average.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We're excited and proud to be giving customers more styles from the pillar brands they covet and introducing new brands that excite them. And we're just getting started. We expect that the remainder of the year will be significantly more impactful. In Q2 alone, new receipts are expected to be up over 420% year over year. And for the rest of the year, we expect new receipts to be up 134% year over year.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We're also planning to launch over 40 new brands and post over 2,700 new styles. For the designers and brands themselves, we believe that Rent the Runway is now well established as a core marketing channel. We've delivered brands an opportunity to reach new customers cost effectively outside of traditional paid marketing channels. We've done this by spending the last fifteen years building trust with brands and connecting them to our customers. The growth of our revenue share and exclusive design channels are unique to Rent the Runway and a testament to the excitement that brands have to partner with us during a time in which they are losing confidence in other retail channels.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

About 20% of items acquired in fiscal year twenty nineteen were exclusive designs and revenue share. This fiscal year, it's expected to be around 70%. And this momentum is expected to continue. In Q2 alone, we're planning to expand into 19 new brands, launch three new exclusive collections, introduce fresh use cases like beach and tennis, and double down on the summer categories our customers crave most when temperatures rise. We expect that the new inventory will continue to have a dramatic effect as more of it hits the site over the course of the year.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Two, now let's walk through our recent product innovations, all of which are in response to direct customer feedback and are designed to make the experience with Rent the Runway best in class for every customer. We know that inventory alone isn't everything. We want our customers to feel that they are getting the white glove experience they expect from a luxury brand, and we're investing in the product and customer service experiences designed to deliver on that vision. We've introduced multiple enhancements to the product for both new members and for customers who have been with us for a while, including back in stock notifications, our number one most requested new feature. Now a subscriber can set a notification if she has her eye on a style but it's not available at the time she's building her order.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

When it's back in stock, she gets notified and can add it to her next order. People are really excited about this feature. 25% of all subscribers have engaged with it since launch, and 48% of those who've engaged with it have successfully added a back in stock item to their bag after getting a notification. Secondly, we launched personalized styling support for our early term customers, where stylists help build hearts list, place orders, and provide personalized suggestions. We believe that this is a very valuable service to our subscribers, many of whom are professional women that value the extra assistance with discovery and ordering.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We provide a complimentary first thirty minute session and have seen a 27% reduction in first month churn when subscribers talk to stylists. We've also introduced a sixty day customer promise for all new and rejoining customers. If a customer doesn't like any of the items in her order during the first sixty days, we'll send her new items for no cost. We've seen that this leads to a 34% reduction in churn. RTR Concierge, where new and rejoining customers receive a call from us to explain the service and answering any questions, is another new initiative that members love.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

So far, we've seen an 18% reduction in churn for those who answered our call and a 14% reduction in churn for those who didn't answer. This has been so successful that we're planning to scale it from 50% of new and rejoining subscribers to 100% by the end of Q2. And lastly, we've launched a more personalized homepage and browsing experience, tailored to what she has happening that month. A key focus for the remainder of the year is to scale these improvements to as many of our subscribers as possible. And we have even more in store.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

In Q2, we're planning to launch a new rewards program that will give subscribers perks and rewards to celebrate milestones and key breakpoints. We're also planning to introduce Harding progression and more personalized feeds to provide a more curated and personalized subscriber browsing and picking experience. All of this innovation is rooted in the pod structure we have developed for our teams at Rent the Runway. Our four pods, retention, revenue, customer growth, and inventory, map directly to our strategy and are designed to enable us to simplify and be more agile in the way we introduce new products and serve customers. This has allowed us to ship new features rapidly, respond quickly to customer needs, and operate much more efficiently overall.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Three, the third area we've been focused on has been restoring the relationship with our customers through authentic, transparent branding and communications, along with member experiences for our community. We know that Rent the Runway is an emotional and aspirational product. It's not purely about renting and purchasing clothing items. So in Q1, we significantly shifted the tone of our marketing towards transparency and community, showing customers we heard you and getting back to the basics of what this brand is all about. This wasn't about deploying more marketing dollars.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Rather, we employed a customer centric, radically authentic strategy ensuring customers felt valued, informed, and excited about the changes. We also launched a brand new organic strategy that broke the fourth wall, meaning we acknowledged the presence of the audience and spoke directly to them through our channels. We engaged with our most opinionated community on Reddit and through a very active Reddit AMA, launched new social features like Instagram Q and A and Jen Reacts, and introduced a new face of Rent the Runway social channels. And it's working. The engagement rate on social channels is up 163% since we launched our new strategy in April and May, as compared to the two months prior.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

I am also personally still responding to customer emails and feedback that comes my way and very actively engaging with our customers regularly. Lastly, we reintroduced member first experiences, engaging hundreds of members both online and in real life. We kicked off the We Heard You hybrid webinar, which allowed our community to hear directly from our leadership team on what's to come. We also hosted a Women at Work styling event, a Wixo exclusive design preview, a Meet the Drop event that drew over three fifty attendees. All of these are examples of how we're bringing the power of our community back in person and virtually.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

In conclusion, we are confident that our new strategy is working. Thanks to the new inventory and product innovation, our quarterly customer retention is the strongest it's been in four years. In Q1 twenty twenty five, we experienced our greatest year over year and quarter over quarter Q1 churn improvement since the pandemic recovery period. We're incredibly excited about the early signals that this inventory strategy is driving results and believe the best is yet to come. We think this is only the beginning and we're optimistic and excited.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

We created this category and we know where it's going. With that, I'll hand it over to Sid.

[Sid Thacker, CFO at Rent the Runway]

Thanks, Jen, and thank you everyone for joining us. As Jen outlined in her remarks, the key message in this quarter's results is that we believe our inventory and product strategies are working. Our teams are energized and we are finding ways to improve our customers' experience every day. We believe our significant inventory investment this year will continue to drive retention as customers experience the full impact of the new arrivals in May and in the months to follow. Let me spend a few minutes discussing why it's taken until fiscal year twenty twenty five to put these plans into action and how we expect fiscal twenty twenty five to unfold.

[Sid Thacker, CFO at Rent the Runway]

Over the past two months, I've been asked by new and existing investors why it's taken us so long to implement the strategies we're executing on in fiscal twenty twenty five. Indeed, some investors have indicated that for the first time they feel like Rent the Runway wants to grow. Let me begin in fiscal twenty twenty two. We had emerged from COVID with a similar sized subscriber base as existed before COVID, but with a relatively small amount of inventory purchased in the intervening period. Over time, we focused on increasing debt and exiting older inventory within the context of managing our cash consumption and our balance sheet.

[Sid Thacker, CFO at Rent the Runway]

In order to continue funding improvements to our customer experience, we substantially reduced costs in fiscal twenty twenty two and fiscal twenty twenty three and made significant strides in moving to an asset light inventory acquisition model. In fiscal twenty twenty four, we brought the business to almost free cash flow breakeven to demonstrate to stakeholders both the strength of our underlying revenue base as well as our sound unit economics. Finally, in fiscal twenty twenty five, armed with the right sized cost structure, brands willing to provide more than double the amount of share by RTR inventory and having already demonstrated progress on cash flow in fiscal twenty twenty four, we are ready to invest. While it hasn't been easy, we're proud of the considerable progress made over the past three years. And yes, we are ready to grow.

[Sid Thacker, CFO at Rent the Runway]

Let me discuss fiscal twenty twenty five. Jen has already outlined how fiscal twenty twenty five is off to a good start with the fastest sequential growth in ending active subscribers in Q1 versus Q4 over the last four years. An important driver of that growth is significantly improved retention on both a sequential and year over year basis. We believe we can improve retention further in fiscal twenty twenty five given the planned buildup of inventory throughout the year as well as new product launches. We also expect subscriber acquisitions to benefit from our investments in fiscal twenty twenty five, albeit with a lag to retention improvements as customers tell others about the positive changes they are seeing at Rent the Runway.

[Sid Thacker, CFO at Rent the Runway]

We expect acquisition improvements to also be driven by improved organic marketing as well as higher levels of promotional spending to expose more customers to our improved offering. Our results for Q1 demonstrated these trends: improved subscriber growth with revenue growth lagging subscriber growth due to higher promotional spending. The good news is that we've reactivated both paused and former customers successfully in Q1 and so far retention for those subscribers is better than we've seen historically. We expect continued improvement in ending active subscriber growth throughout the fiscal year. As I will also outline shortly, we will not hesitate to invest further in the customer proposition if we think it is prudent.

[Sid Thacker, CFO at Rent the Runway]

I will now review results for the first quarter before providing Q2 and full year 2025 guidance. We ended Q1 twenty twenty five with 147,157 ending active subscribers, up approximately 1% year over year. Average active subscribers during the quarter were 133,468 subscribers versus 135,896 subscribers in the prior year, a decrease of 1.8%. Ending active subscribers increased from 119,778 subscribers at the end of Q4 twenty twenty four, due primarily to sequentially higher subscriber acquisitions, higher promotional spending, a decrease in paused subscribers and improved retention. Total revenue for the quarter was $69,600,000 down $5,400,000 or 7.2% year over year and down $6,800,000 or 8.9% quarter over quarter.

[Sid Thacker, CFO at Rent the Runway]

Subscription and reserve rental revenue was down 6.2% year over year in Q1 twenty twenty five, primarily due to lower average revenue per subscriber driven by increased promotional spend and lower average subscribers versus Q1 twenty twenty four. Other revenue decreased 14.6% or 1,300,000 year over year. Fulfillment costs were $20,400,000 in Q1 twenty twenty five versus $20,600,000 in Q1 twenty twenty four and $20,200,000 in Q4 twenty twenty four. Fulfillment costs as a percentage of revenue were 29.3 of revenue in Q1 twenty twenty five compared to 27.5% of revenue in Q1 twenty twenty four. Fulfillment costs primarily reflect higher transportation costs as a result of carrier rate increases.

[Sid Thacker, CFO at Rent the Runway]

Gross margins were 31.5% in Q1 twenty twenty five versus 37.9% in Q1 twenty twenty four. Q1 '20 '20 '5 gross margins reflect higher revenue share costs as a percentage of revenue due to greater share by RTR inventory in addition to higher fulfillment costs as a percentage of revenue. Q1 twenty twenty five gross margins decreased quarter over quarter to 31.5% from 37.7% in Q4 twenty twenty four due primarily to seasonally higher revenue share payments combined with higher fulfillment costs as a percentage of revenue. Sequentially higher fulfillment costs as a percentage of revenue reflect lower revenue per order as we chose to sell less inventory this quarter to increase inventory available for subscribers. Operating expenses were 6% lower year over year, due primarily to lower stock based compensation expenses.

[Sid Thacker, CFO at Rent the Runway]

Total operating expenses, which include technology, marketing and G and A, were 55.9% of revenue in Q1 twenty twenty five versus 55.2% of revenue in Q1 twenty twenty four and forty four percent of revenue in Q4 twenty twenty four. Adjusted EBITDA for Q1 twenty twenty five was negative $1,300,000 or negative 1.9% of revenue versus $6,500,000 or 8.7% of revenue in Q1 twenty twenty four. The decrease in adjusted EBITDA versus the prior year is primarily a result of lower revenue and higher revenue share expenses. Free cash flow for Q1 twenty twenty five was negative $6,400,000 versus negative $1,400,000 in Q1 twenty twenty four. Free cash flow decreased versus the prior year, primarily due to lower adjusted EBITDA and higher purchases of rental product on account of our inventory strategy for fiscal year twenty twenty five.

[Sid Thacker, CFO at Rent the Runway]

I will now discuss guidance for Q2 twenty twenty five and fiscal year twenty twenty five. Our full year guidance remains unchanged. We continue to expect double digit growth in ending active subscribers for fiscal year twenty twenty five. We also continue to expect full year cash consumption to be between negative $30,000,000 and negative $40,000,000 As I outlined last quarter, I want to emphasize that this free cash flow range is indicative with many factors that may influence the final result. The overarching message remains that Rent the Runway is playing offense and that we intend to invest prudently when it makes sense for our customers even if that results in free cash flow outside the provided ranges.

[Sid Thacker, CFO at Rent the Runway]

Let me now discuss Q2 guidance. For Q2 twenty twenty five, we expect revenue to be between $76,000,000 and $80,000,000 We expect adjusted EBITDA margins to be between negative 22% of revenue. Finally, let me reiterate my comments on tariffs from our April earnings call. Our guidance does not factor in any potential impact from tariffs given all the uncertainties. We believe we are fortunate that we directly import a relatively small portion of inventory and have placed orders for the majority of our inventory receipts for fiscal year twenty twenty five.

[Sid Thacker, CFO at Rent the Runway]

However, there is no guarantee impact. It's also difficult to predict customer behavior, but we believe renting does offer substantially greater value for consumers versus buying. We are mindful that the environment remains uncertain and plan to operate prudently in the months ahead. In conclusion, we're pleased to see customers respond enthusiastically to our significant investment in inventory in fiscal twenty twenty five. The energy from both our customers and employees is palpable.

[Sid Thacker, CFO at Rent the Runway]

Our brand messaging is authentic. We have more to do, but believe we are firmly on the right track.

[Jennifer Hyman, President, Co-Founder, Chairman & CEO at Rent the Runway]

Thanks for the call today, and we look forward to continuing to update you on Rent the Runway.

[Operator]

Great, thank you. And with that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines

Participants

Executives

• Cara Schembri, Chief Legal & Administrative Officer
• Jennifer Hyman, President, Co-Founder, Chairman & CEO
• Sid Thacker, CFO