Rent the Runway ( NASDAQ: RENT ) shares fell by double-digits in extended trading after earnings disappointed and the company announced a restructuring plan that included significant layoffs.
For the second quarter, the eCommerce company beat on top and bottom lines . However, a report of 124,131 active subscribers at quarter-end came up short of the consensus estimate of 143,691. Additionally, forward guidance fell short of expectations as management trimmed forecasts.
For the third quarter, the company said it expects revenue in the range of $72M to $74M against a $79.5M estimate. For the full year, a revenue forecast range of $285M to $290M came in below the prior forecast of $295 to $305M.
The company also announced a restructuring plan to “reduce costs, streamline its organizational structure and drive operational efficiencies” for the remainder of the year. The plan primarily includes a 24% headcount reduction among corporate employees. The company estimates that it will incur total cash charges of $2.5M for the restructuring. Management forecast annual operating expense savings of $25 to $27M relative to Q2 2022 in fiscal 2023 as a result of the restructuring.
“We believe the $25M-$27M in anticipated annualized fixed cost savings we've announced help ensure RTR can navigate potentially rougher macro conditions, while also allowing us to significantly improve our medium-term profitability,” CFO Scarlett O’Sullivan said. “As a result, we are raising our annual Adjusted EBITDA margin outlook and accelerating our timeline to self-fund. Over the medium-term, we believe we can generate 15% profitability on Adjusted EBITDA after product depreciation.”
Shares fell 16.84% shortly after the earnings announcement .
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Rent the Runway stock plummets as subscribers, guidance disappoint