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Rent the Runway is Filing for an IPO
Rent the Runway has filed for an IPO, despite its valuation dipping as a result of the pandemic. The online rental service has hopes that as the US continues to lift restrictions, parties and weddings will resume at a more regular rate.
The online platform confidentially filed for an IPO in July this year. Rent the Runway is a leading online clothing rental company, founded in 2009 by Jennifer Hyman and Jennifer Fleiss. “Prior to Rent the Runway, wearing beautiful designer fashion wasn’t a realistic option for most people,” said Hyman in a statement for prospective investors. “We have democratised high-end fashion for women everywhere.”
The resale category is booming, with businesses worldwide jumping on the bandwagon. By 2025, the resale market is set to reach a valuation of $2.08 billion. In Australia, large retailers, both multichannel and pureplay, have set their eyes on the resale market, with The Iconic and David Jones launching their own platforms within one week of each other.
Rent the Runway’s current filing is USD100 million, but this is subject to change once the share sale terms are set. The filing is being led by Goldman Sachs Group Inc., Morgan Stanely and Barclays Plc. It is expected to use the ticker symbol ‘RENT’ when it lists on NASDAQ.
In 2019, Rent the Runway earned a unicorn status when it was valued at USD1 billion, but this has since slipped to USD750 million. The road to the IPO has been a bit rocky for Rent the Runway. In 2019 the retailer was in hot water due to an operations issue. This resulted in customers not receiving their orders, and experiencing massive delays, with an added ‘breakdown’ of customer service. This issue has since been resolved.
Rent the Runway reported a net loss of USD85 million on top of a USD80 million revenue in the period ending July 2021. Furthermore, last year the online platform has reported a net loss of USD88 million on revenue of USD88.5 million last year. “The global macroeconomic effects of the pandemic may persist for an indefinite period of time, even after the pandemic has subsided,” said the filing.
According to Bloomberg, the business has reported that 2.5 million users have tried out the platform at some point, but has a retention rate of about five percent. Last year it recorded 95,425 subscribers, compared to 147,866 in 2019. Active customers are also down, currently 54,797, down from 133,572 in 2019.
However, the business reported an increase in subscribers in the first six months of 2021, now counting 126,841 total members and 97,614 active customers compared to 54,000 in 2020. “We couldn’t have foreseen the global pandemic and the resulting fight for our survival,” said Hyman in the filing. “Today, Rent the Runway has emerged stronger.”
During the pandemic, Rent the Runway shut its existing brick and mortar stores, and changed up its subscription service to remove its unlimited rental options, replacing them with four, eight or 16 items each month. This was part of the plan prior to the pandemic, Hyman said. “There are of course going to be a segment of unlimited users who are extremely upset about this decision … and this isn’t a decision we made lightly,” she said at the time.
More than 80 percent of users that joined over the pandemic chose four to eight items per order, Hyman explained. “We think it’s important for members to pay for their usage. Paying per usage is also the most financially viable decision for [Rent the Runway] long-term.”
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