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) is a fashion technology company that operates an online platform for renting designer apparel and accessories. Customers can access clothing, handbags, jewelry and other fashion items through subscription-based plans or individual rental orders, allowing them to wear products for specific occasions without purchasing them outright.

The company’s offerings include designer dresses, workwear, casual apparel, outerwear and accessories for women. Rent the Runway manages the rental process through its digital platform, including product selection, fulfillment, cleaning and returns. It also supports the resale of previously rented merchandise through its marketplace and other sales channels.

Rent the Runway was founded in 2009 by Jennifer Hyman and Jennifer Fleiss and initially focused on occasion-wear rentals before expanding into recurring wardrobe subscriptions. The company serves customers primarily in the United States. Jennifer Hyman, a co-founder, has served as the company’s chief executive officer.

Rent the Runway Q1 2026 Earnings Call Transcript

Key Takeaways

• Ended Q1 with 147,157 active subscribers—a company record—and achieved the strongest quarterly customer retention in four years.
• Invested in our largest ever inventory expansion, with Q1 receipts up 24% year-over-year, launching 36 new brands and over 1,000 new styles, and planning Q2 receipts up 420% year-over-year.
• Rolled out customer-requested features—back-in-stock notifications (used by 25% of subscribers), personalized styling support (first-month churn down 27%), and a 60-day customer promise (churn down 34%).
• Reported Q1 revenue of $69.6 million, down 7.2% year-over-year, with gross margin at 31.5% (versus 37.9% prior) and an adjusted EBITDA loss of $1.3 million.
• Maintained fiscal 2025 guidance for double-digit ending subscriber growth, offset by expected free cash flow consumption of $30–40 million and a Q2 adjusted EBITDA margin loss of around 22%.

Presentation

[Operator]

Welcome to the Rent The Runway Quarter One, 2025 Earnings Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this call is being recorded. It is now my pleasure to introduce Cara Schembri, Chief Legal Officer. Thank you, Cara. You may begin.

[Cara Schembri, Chief Legal Officer at Rent The Runway]

Hello, everyone, and thanks for joining us today. During this call, we will make references to our Q1 2025 earnings presentation, which can be found in the events and presentation 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 2025 and the fiscal year 2025, 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 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 10Q 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. With that, I'll turn it over to Jenn.

[Jennifer Hyman, CEO at Rent The Runway]

Thank you, Cara, 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. As I speak with you today, I'm happy to report that our transformation strategy is working.

[Jennifer Hyman, CEO at Rent The Runway]

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. 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.

[Jennifer Hyman, CEO at Rent The Runway]

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. 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. We're building depth across categories that we know our customers desire, like denim, outerwear, day dresses, casual everyday clothing, handbags, and workwear.

[Jennifer Hyman, CEO at Rent The Runway]

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. We launched 36 new brands and over 1,000 new styles that aligned with what we know our customer is looking for. We've been right. Our customers are more engaged with our selection than ever before. Our spring 2025 inventory has a 23% higher share of views, 46% more hearts, and a 14% higher love rate than our spring buy last year. She's also adding more to her shipment with April add-on gross bookings up 11% year over year.

[Jennifer Hyman, CEO at Rent The Runway]

We've identified several pillar brands like Veronica Beard, A.L.C., Ulla Johnson, and Staud, 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, Ganni, and Simon Miller, and they're leading the way in customer engagement. The new Simon Miller collection alone drove almost 3 million views. From a cost perspective, I want to remind you that these collections deliver comparable quality at approximately 40% lower cost on average. We're excited and proud to be giving customers more styles from the pillar brands they covet and introducing new brands that excite them. We're just getting started. We expect that the remainder of the year will be significantly more impactful.

[Jennifer Hyman, CEO at Rent The Runway]

In Q2 alone, new receipts are expected to be up over 420% YoY. For the rest of the year, we expect new receipts to be up 134% YoY. We are 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 have delivered brands an opportunity to reach new customers cost-effectively outside of traditional paid marketing channels. We have done this by spending the last 15 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, CEO at Rent The Runway]

About 20% of items acquired in fiscal year 2019 were exclusive designs and revenue share. This fiscal year, it's expected to be around 70%. 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. 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.

[Jennifer Hyman, CEO at Rent The Runway]

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've 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. 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.

[Jennifer Hyman, CEO at Rent The Runway]

Secondly, we launched personalized styling support for our early-term customers, where stylists help build hearts lists, 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. We provide a complimentary first 30-minute session and have seen a 27% reduction in first-month churn when subscribers talk to stylists. We've also introduced a 60-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 60 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, 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. 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. We have even more in store. 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.

[Jennifer Hyman, CEO at Rent The Runway]

All of this innovation is rooted in the pod structure we've 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. 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.

[Jennifer Hyman, CEO at Rent The Runway]

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. 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&A and Jenn Reacts and introduced a new face of Rent The Runway's social channels. It's working.

[Jennifer Hyman, CEO at Rent The Runway]

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. 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 Rixo exclusive design preview, a Meet the Drop event that drew over 350 attendees. All of these are examples of how we're bringing the power of our community back in person and virtually. In conclusion, we are confident that our new strategy is working.

[Jennifer Hyman, CEO at Rent The Runway]

Thanks to the new inventory and product innovation, our quarterly customer retention is the strongest it's been in four years. In Q1 2025, 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. 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, Jenn, and thank you, everyone, for joining us. As Jenn 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.

[Sid Thacker, CFO at Rent The Runway]

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 2025 to put these plans into action and how we expect fiscal 2025 to unfold. 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 2025. Indeed, some investors have indicated that for the first time, they feel like Rent The Runway wants to grow. Let me begin in fiscal 2022. 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.

[Sid Thacker, CFO at Rent The Runway]

Over time, we focused on increasing depth and exiting older inventory within the context of managing our cash consumption and our balance sheet. In order to continue funding improvements to our customer experience, we substantially reduced costs in fiscal 2022 and fiscal 2023 and made significant strides in moving to an asset-light inventory acquisition model. In fiscal 2024, 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 2025, armed with a 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 2024, we are ready to invest. While it has not been easy, we are proud of the considerable progress made over the past three years.

[Sid Thacker, CFO at Rent The Runway]

Yes, we are ready to grow. Let me discuss fiscal 2025. Jenn has already outlined how fiscal 2025 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 2025 given the planned build-up of inventory throughout the year as well as new product launches. We also expect subscriber acquisitions to benefit from our investments in fiscal 2025, albeit with a lag to retention improvements, as customers tell others about the positive changes they are seeing 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.

[Sid Thacker, CFO at Rent The Runway]

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. I will now review results for the first quarter before providing Q2 and full year 2025 guidance. We ended Q1 2025 with 147,157 ending active subscribers, up approximately 1% YoY. Average active subscribers during the quarter were 133,468 subscribers versus 135,896 subscribers in the prior year, a decrease of 1.8%.

[Sid Thacker, CFO at Rent The Runway]

Ending active subscribers increased from 119,778 subscribers at the end of Q4 2024 due primarily to sequentially higher subscriber acquisitions, higher promotional spending, a decrease in paused subscribers, and improved retention. Total revenue for the quarter was $69.6 million, down $5.4 million, or 7.2% YoY, and down $6.8 million, or 8.9% QoQ. Subscription and reserve rental revenue was down 6.2% YoY in Q1 2025 primarily due to lower average revenue per subscriber driven by increased promotional spend and lower average subscribers versus Q1 2024. Other revenue decreased 14.6%, or $1.3 million YoY. Fulfillment costs were $20.4 million in Q1 2025 versus $20.6 million in Q1 2024 and $20.2 million in Q4 2024. Fulfillment costs as a percentage of revenue were 29.3% of revenue in Q1 2025 compared to 27.5% of revenue in Q1 2024. 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 2025 versus 37.9% in Q1 2024. Q1 2025 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 2025 gross margins decreased quarter-over-quarter to 31.5% from 37.7% in Q4 2024 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. Total operating expenses, which include technology, marketing, and G&A, were 55.9% of revenue in Q1 2025 versus 55.2% of revenue in Q1 2024 and 44% of revenue in Q4 2024.

[Sid Thacker, CFO at Rent The Runway]

Adjusted EBITDA for Q1 2025 was -$1.3 million or -1.9% of revenue versus $6.5 million or 8.7% of revenue in Q1 2024. 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 2025 was -$6.4 million versus -$1.4 million in Q1 2024. 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 2025. I will now discuss guidance for Q2 2025 and fiscal year 2025. Our full year guidance remains unchanged. We continue to expect double-digit growth in ending active subscribers for fiscal year 2025. We also continue to expect full year cash consumption to be between -$30 million and -$40 million.

[Sid Thacker, CFO at Rent The Runway]

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. Let me now discuss Q2 guidance. For Q2 2025, we expect revenue to be between $76 million and $80 million. We expect adjusted EBITDA margins to be between -2% and 2% 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.

[Sid Thacker, CFO at Rent The Runway]

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 2025. However, there is no guarantee that this will mitigate any 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 2025. The energy from both our customers and employees is palpable. Our brand messaging is authentic. We have more to do, but believe we are firmly on the right track.

[Jennifer Hyman, 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. With that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your line.

Participants

Executives

• Cara Schembri, Chief Legal Officer

Analysts

• Sid Thacker, CFO at Rent The Runway
• Jennifer Hyman, CEO at Rent The Runway