RENT - Rent the Runway stock slides on soft sales outlook

2023-04-12 16:24:01 ET

Rent the Runway ( NASDAQ: RENT ) stock slid sharply in Wednesday’s extended trading after forecasting below consensus sales.

The New York-based fashion platform posted a lighter than expected loss while narrowly edging revenue estimates . Additionally, a report of 126,712 active subscribers at the end of its fiscal fourth quarter marked a 10% increase from the prior year. As of April 8, the company touted a record 141,205 active subscribers.

Gross margin was 44.2%, up 750 basis points from the prior year, while adjusted EBITDA margin was 9.4% as compared to negative 8.6% in the fourth quarter of 2021.

“I'm proud that in fiscal 2022, we achieved 46% Revenue growth and completed a significant financial transformation, doubling our gross margins compared to 2019, right-sizing our fixed cost base, improving the capital efficiency of our product acquisition and restructuring our debt,” CEO Jennifer Hyman commented. “These efforts drove progress on our path to FCF profitability, as we posted our first full year and third consecutive quarter of positive Adjusted EBITDA ahead of the timeline we outlined at IPO.”

CFO Scarlett O’Sullivan added that a focus on cost savings was able to drive margin expansion in 2022 as compared to 2021.

“We believe we are set up for strong Adjusted EBITDA and significantly lower cash consumption in fiscal 2023, on our path to achieve free cash flow breakeven,” she said.

Moving forward, the company expects active subscriber growth of more than 25% and a year over year reduction in cash consumption by “almost 50%.”

Management expects revenue in the range of $320M to $330M, below the $346M expected by analysts. For the first quarter, revenue is expected to range from $72M to $74M, below the $76.64M.

Shares of Rent the Runway ( RENT ) slid 20% immediately after the print before rebounding to about a 7% drop.

Read more on the earnings expectations for the company .

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