Rent the Runway CEO says pandemic forced company to create new customer services

As Rent the Runway prepares for its market debut Wednesday, the company said the growth of its fashion rental business isn’t entirely dependent on women returning to offices.

“Women did not have to return to the office to return to Rent the Runway,” said CEO Jennifer Hyman on CNBC’s “Squawk Box.”

Ninety percent of the company’s customers continue to work from home, according to Hyman, but subscriber levels are rising.

“And so as women do return to an office, even if it’s just a few days a week, or return to a party, that’s just continued upside for the business,” Hyman said.

Rent the Runway’s stock is expected to begin trading Wednesday on Nasdaq under the ticker symbol RENT.

On Tuesday, the company’s initial public offering priced at the top of its expected range. It sold 17 million shares for $21 each, after marketing 15 million shares for between $18 and $21. That gives the company a market value of $1.3 billion, based on shares outstanding. Accounting for employee stock options and similar holdings, Rent the Runway’s fully diluted value would be roughly $1.5 billion.

Last year, the company’s valuation shrank to roughly $750 million as the pandemic weighed on Rent the Runway’s ability to attract users. In 2020, the company’s active subscriber count fell to about 55,000, from more than 133,000 a year earlier. Revenue tumbled 39% to $157.5 million. While its net loss widened to $171.1 million from $153.9 million in 2019.

But a return to social events such as weddings and birthday celebrations is helping Rent the Runway rebound. It counted nearly 98,000 active subscribers in the six months ended July 31, up from roughly 54,000 in the same period of 2020. By September, active subscribers grew to 112,000, according to its latest securities filing.

Rent the Runway, which describes itself as a “closet in the cloud,” had to get creative to stay afloat during the pandemic. It shuttered its stores and overhauled its subscription plans, sunsetting an unlimited option. It also entered the resale market, allowing consumers to shop without a membership.

“It’s an incredible new customer funnel into subscription,” Hyman said about the resale option. “It’s exactly how we look at our special events rental business. … It’s a way to introduce a new customer to how valuable our assortment is and to how easy it is to come to Rent the Runway.”

According to Hyman, the health crisis ultimately helped make its business stronger.

“If anything, this pandemic pushed us even more as consumers into sharing models and into valuing experiences over ownership,” Hyman said.

Rent the Runway’s listing follows the public debut of glasses maker Warby Parker and comes ahead of sneaker retailer Allbirds’ anticipated IPO. There has been a wave of trendy, venture-backed retailers testing investors’ appetite on Wall Street.

The IPO will offer Wall Street another barometer to gauge investors’ appetite for the clothing rental business, too. Rent the Runway joins other publicly listed companies Poshmark and ThredUp, both of which sell secondhand clothing and other wares.

Founded in 2008 by Hyman and Jenny Fleiss, Rent the Runway is an online platform that offers users multiple subscription options to rent clothing and accessories from designer brands. For example, a subscriber could rent eight items per month at a monthly rate of $99 for the first two months and then $135 for each month thereafter.

Rent the Runway is a CNBC Disruptor 50 company.

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