Rent the Runway NASDAQ: RENT reported sharply higher first-quarter fiscal 2026 revenue and reiterated its full-year outlook, as management pointed to stronger subscriber monetization, growth in add-on items and early progress in new revenue initiatives.
The apparel rental company posted total revenue of $89.9 million for the quarter, up 29.2% year over year and above its prior guidance range of $85 million to $87 million. Interim CEO Teri Bariquit said the quarter showed that the company’s strategy is “working,” citing growth in subscription revenue, add-on revenue and emerging business lines.
“We had a great first quarter, fiscal year 2026, where we grew revenue and made progress against our goal to diversify revenue streams,” Bariquit said on the call.
Leadership Changes Mark New Chapter
The earnings call was the company’s first since co-founder and longtime CEO Jennifer Hyman stepped down in mid-May after 18 years leading Rent the Runway. Bariquit, who joined the board in October and became interim CEO and president following Hyman’s departure on May 15, thanked Hyman and said she will remain an adviser through Jan. 27 to support the transition.
Bariquit also outlined her background, noting she spent 37 years at Nordstrom, most recently as chief merchandising officer. She said her focus at Rent the Runway will center on customer needs, brand partnerships and operational execution.
The company also announced new senior leadership appointments. Paige Thomas joined as chief commercial officer on June 1. Bariquit said Thomas previously served as chief merchant and product innovation officer at Signet Jewelers and as president and CEO of Saks OFF 5TH. Dave Loretta is joining as interim chief financial officer and treasurer while the company searches for a permanent CFO. Loretta previously served as CFO of The Honest Company and Duluth Trading Company, according to Bariquit.
Outgoing CFO Sid Thacker said the call would be his last as Rent the Runway’s finance chief. “I believe that Rent the Runway’s business is the strongest it’s been since I joined the company in mid 2022,” Thacker said.
Revenue Growth Driven by Subscriptions, Add-Ons and Retail
Thacker said first-quarter results reflected strength across the business, with subscription revenue growth driven by higher average revenue per subscriber and more active subscribers. Subscription and Reserve rental revenue rose 25.3% year over year, primarily due to higher average subscribers and higher average revenue per subscriber following a subscription price increase that took effect Aug. 1. That was partially offset by lower Reserve revenue versus the prior-year period.
Other revenue increased 60.5% year over year, primarily due to significantly higher retail revenue. Bariquit said add-on revenue grew 70% year over year and 11% sequentially, driven mainly by a higher percentage of subscribers using the add-on product feature.
“This signals to us that our customer is loving the assortment and that the membership flexibility we are offering is working,” Bariquit said.
The company ended the quarter with 155,692 active subscribers, up 5.8% year over year. Average active subscribers totaled 149,744, up 12.2% year over year. Thacker said subscriber growth was primarily driven by a higher base of active subscribers exiting the fourth quarter of fiscal 2025 and higher subscriber acquisitions in the first quarter, partially offset by higher additions to the paused subscriber base.
However, Thacker noted a deceleration in year-over-year ending active subscriber growth compared with prior quarters. He said the slowdown was expected and largely reflected tougher comparisons in the first half of fiscal 2026 due to normalized marketing spending versus the fourth quarter of fiscal 2025 and strong promotional activity last year tied to significant inventory increases.
Margins, Costs and Cash Flow
Fulfillment costs were $23.6 million, compared with $20.4 million a year earlier. As a percentage of revenue, fulfillment costs improved to 26.2% from 29.4% in the prior-year quarter. Thacker attributed the improvement primarily to higher revenue per order, driven by the August price increase and higher retail revenue, partially offset by higher transportation costs, fuel surcharges and warehouse processing costs.
Gross margin was 25.9%, down from 31.5% in the prior-year quarter. Thacker said the decline reflected higher revenue share costs as a percentage of revenue due to higher Share by RTR inventory levels, partly offset by lower rental product depreciation and write-off costs and lower fulfillment costs as a percentage of revenue.
Adjusted EBITDA was negative $0.8 million, or negative 0.9% of revenue, compared with negative $1.3 million, or negative 1.9% of revenue, in the prior-year quarter. Free cash flow was negative $13.6 million, compared with negative $6.4 million a year earlier. Thacker said the decline was primarily due to working capital timing, timing of payments and higher cash interest expense, partially offset by lower inventory-related capital expenditures.
Thacker said the company continues to expect improved free cash flow for the full fiscal year, noting that its April 2026 debt amendment allows it to pay interest in kind through April 2027.
AI Discovery and New Revenue Initiatives
Bariquit said Rent the Runway’s 2025 inventory transformation has strengthened the business and that fiscal 2026 is focused on discovery, including the use of artificial intelligence to improve how customers find items.
In April, the company launched personalized carousels across its platform for all subscribers, including recommendations based on recent favorites and a curated feed. Bariquit said those improvements drove an 11% increase in hearting behavior among active subscribers. In May, the company used AI imagery to update outdated visuals for certain styles, which Bariquit said increased views on those styles by 129%. The company also began internal testing of outfit generation, which is designed to suggest full looks rather than individual items.
Rent the Runway is also pursuing early-stage growth initiatives including an online marketplace, advertising and media, and B2B services. Bariquit said the company expanded access to the Rent the Runway Marketplace in April and that it is now live from the homepage, though it remains small from a revenue standpoint. The company also launched a B2B dry cleaning service pilot in the first quarter and has made technology investments to support scaling.
Outlook Reiterated Despite Uncertainty
Rent the Runway reiterated its expectation for double-digit revenue growth in fiscal 2026 and adjusted EBITDA of 4% to 7% of revenue. The company also continues to expect rental product acquired to be between $45 million and $50 million for the year.
For the second quarter, the company guided for revenue of $91 million to $95 million, representing growth of 12% to 17% versus the prior-year quarter. It expects second-quarter adjusted EBITDA of 5% to 8% of revenue.
Thacker said the guidance reflects the company’s decision to preserve inventory for the rental business, the significant increase in retail revenue seen in the prior-year quarter, continued declines in Reserve, expected subscriber growth timing and uncertainty around customer reaction to passing along fuel surcharges.
He also cautioned that the macroeconomic and geopolitical environment remains “highly uncertain,” with potential effects on transportation costs, fuel surcharges and consumer confidence.
About Rent the Runway NASDAQ: RENT
Rent the Runway NASDAQ: RENT operates an online marketplace and subscription service that provides designer apparel and accessory rentals to consumers. The company offers both one-time rentals and tiered subscription plans, enabling members to borrow items on a recurring basis rather than purchasing them outright. Rent the Runway's inventory spans a wide range of brands and styles, including evening gowns, everyday wear, handbags and jewelry, positioning the company within the broader sharing-economy and circular-fashion movements.
Founded in 2009 by Jennifer Hyman and Jennifer Fleiss, Rent the Runway was built on the premise of making high-end fashion more accessible and sustainable.
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