Rent the Runway, Inc. ($RENT) Earnings (Q2 FY22)

 Rent the Runway, Inc. ($RENT) Earnings and Opinion:


Rent the Runway is a company in the Consumer Cyclical sector and operates in the Apparel Retail industry. The company rents designer wear for women through its stores and online retail. Rent the Runway was incorporated in 2009 and is currently headquartered in Brooklyn, New York. The company made its IPO in October 27, 2021. 

Rent the Runway Earnings Results:

  • Revenues of $77M beating expectations of $74M
  • Gross Profit of $32M beating expectations of $26M
  • Gross Margin of 42.4% beating expectations of 35.1%
  • Adjusted EBITDA of $1.8M beating expectations of -$3.3M
  • EPS of -$0.53 beating expectations of -$0.65
  • Active Subs of 124,000 missing expectations of 144,000
  • Revenue guidance missed estimates for Q3 and FY
Opinion:
Rent the Runway is currently down over 23%, after reporting earning yesterday afternoon. The company had a decently good earnings report. The guidance is what is killing them currently. Rent the Runway announced a plan to cut 24% of workforce, and they also missed the expectations of Active Subscribers. Revenues still looked polished, up 64% on a YOY basis. Gross Margin beat expectations by a whopping 725bps. Gross Profit showed an increase of 78%, compared to last year at $18.2M. As far as valuation goes, the P/S metric sits at 1.34, which is below industry levels. The current ratio sits comfortably at 3.13. Debt outweighs the cash by about $100M, as well. In my opinion, Rent the Runway is losing steam. There is some upside here with this one, but it may not come in the near future. What started out as a fun business model, has now failed to gain subscribers in this quarter. This could be due to the current economic headwinds many consumers are facing. This seems like a business that targets individuals who have a little bit of extra money to spend. With that extra money to spend going away in many households, due to rising costs and the strengthening of the dollar, we are now seeing the active subscriber count fall. I think in the long-run, we could see this business pick up some steam. It will definitely be cheap after this drop as well. I am going to stay away from Rent the Runway currently, and explore other retailer instead. 


*Information from Rent the Runway, Yahoo Finance, CMLVIZ, Consensus Gurus

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