Rent the Runway, Inc.

What they do

Founded in November 2009, Rent the Runway operates a shared designer closet with thousands of styles from hundreds of brand partners, sourced directly from or in partnership with those brands. Customers access the closet through a monthly Subscription, a-la-carte Reserve rentals, or Resale purchases of pre-loved items at up to 90% off designer retail value. The company runs proprietary just-in-time reverse logistics and garment science to turn items multiple times over multiple years, and had served approximately 3.5 million lifetime customers as of the fiscal 2025 10-K.

Revenue drivers

• Subscription — The core recurring rental membership; 90% of total revenue in fiscal year 2025 and 90% of total revenue for the six months ended July 31, 2026 was generated by subscribers while active or paused.
• Reserve — A-la-carte rental for specific occasions; management describes Reserve as carrying the company's strongest satisfaction scores and a target of redirected investment in 2026.
• Resale — Sales of pre-loved styles from the closet at up to 90% off designer retail value, offered to subscribers and customers.
• Add-on bookings — Add-on bookings grew 81% year-over-year in Q2 FY2026, with 33% of subscribers using an add-on during the quarter versus 29% a year earlier.

Recent performance

For the quarter ended July 31, 2026, revenue was $97.7 million, up 20.8% year-over-year, and gross margin expanded 609 basis points to 36.1% from 30.0%. Net loss narrowed to $(12.9) million, or (13.2)% of revenue, from $(26.4) million, or (32.6)% of revenue, in the prior-year quarter, and Adjusted EBITDA was $12.6 million (12.9% of revenue) versus $3.6 million (4.4%). Ending Active Subscribers declined 3.8% year-over-year to 140,826, while Average Active Subscribers rose 1.0% to 148,259 and ending Total Subscribers including paused rose 0.5% to 186,019. The company reaffirmed full-year fiscal 2026 guidance for revenue and Adjusted EBITDA.

Strategy

Management says it is concentrating resources on the core rental and selling businesses, pausing an online marketplace pilot, on-site advertising monetization, and new B2B dry cleaning opportunities. The company completed the rollout of AI-powered outfits generation to all customers by the end of June 2026, where app engagement is approximately 35% and pilot users added items to their bag about 12% more often, and in August 2026 rolled out avatars within the outfits experience while piloting virtual try-on. On September 11, 2026, Rent the Runway named Paige Thomas Chief Executive Officer and President effective September 14, 2026, succeeding Interim CEO Teri Bariquit, who became non-executive Chair of the Board, with Dhiren Fonseca stepping down as Executive Chairman while remaining a director. A recapitalization completed October 28, 2025 reduced existing indebtedness and added capital, and came with a new credit agreement containing covenants.

Risks

• Subscriber retention — Ending Active Subscribers fell 3.8% year-over-year to 140,826 in the quarter ended July 31, 2026, and the company cites failure to retain customers as a risk to results.
• Debt covenants and capital structure — The new credit agreement entered with the October 2025 Recapitalization Transactions includes covenants that could restrict operations or growth initiatives, and failure to comply could materially hurt results; total liabilities were $257.9 million against $192.4 million in total assets at July 31, 2026.
• Material weaknesses in internal control — The 10-K risk factor summary discloses identified material weaknesses in internal control over financial reporting, which could impair reporting compliance and capital markets access if not remediated.
• Macroeconomic and consumer discretionary exposure — The company states it relies on consumer discretionary spending and has been, and may in the future be, adversely affected by economic downturns and other conditions, including global trade policies and tariffs.

Outlook

Management reaffirmed full-year fiscal 2026 guidance for revenue and Adjusted EBITDA and said it has begun building a 2027 plan centered on transforming the business. Interim CEO Teri Bariquit said the core rental business continues to grow and the company is operating from a focused foundation. Incoming CEO Paige Thomas, effective September 14, 2026, said the focus is on listening to the customer, doubling down on fashion, and executing with operational excellence, describing the approach as an acceleration of the existing foundation rather than a new direction.