Rent the Runway shares slip on weaker-than-expected second-quarter outlook

Investing.com — Shares in Rent the Runway Inc (NASDAQ:) slumped in premarket trading on Thursday as the fashion platform unveiled a weaker-than-anticipated outlook for second-quarter sales due to a planned drawdown in promotional activity to attract new customers.

The New York-based company, which allows users to rent, subscribe or buy designer apparel, said it expects to deliver revenue of $77 million to $79M in its current three-month period. Bloomberg consensus estimates had seen the forecast at $81M.

In a call with analysts, chief financial officer Sid Thacker noted that the business is currently attempting to be “less promotional” with its new customer offer pricing. Thacker explained that this move aims to improve the retention of current clients and place more investment into improving the overall shopping experience.

However, he flagged that this strategy will reduce short-term acquisitions, especially in its lower-priced services.

“As a result, we expect lower ending active subscribers in [the second quarter] versus [the first quarter],” Thacker said.

But Rent the Runway still plans to post ending subscriber growth of more than 25% in its 2023 fiscal year, which Thacker said will be underpinned in part by the extra funding placed into improving its platform. The initiative is expected to ultimately help boost subscriber loyalty, particularly in the second half of the year, he added.

The group remained confident that a strong start to 2023 will also support its annual returns. In the , revenue jumped by more than a tenth to $74.2M following a 7.6% year-on-year uptick in active subscribers. Both figures beat expectations.

As a result, Rent the Runway’s net loss in the three months ended on April 30 narrowed to $30.1M.