Rent The Runway Gains 13% Subscribers

Key Points

• Revenue reached $80.9 million, up 2.5% year over year, ahead of management's top-end Q2 guidance.

• Gross margin dropped 1,110 basis points to 30.0% in the fiscal second quarter, and net loss widened to $(26.4) million.

• Active subscribers grew 13.4% year over year to 146,373, hitting management’s double-digit growth goal.

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Rent The Runway (NASDAQ:RENT), the fashion rental platform offering subscription-based access to designer apparel, reported its fiscal second quarter results for the period ended July 31, 2025, on September 11, 2025. The company surpassed its upper-end revenue guidance, with earnings showing solid double-digit subscriber growth but also highlighting significant profitability setbacks. While the top-line result and user metrics were positive, steep declines in margins and a swelling net loss made for a mixed overall quarter.

Understanding Rent The Runway's business and its strategic focus

Rent The Runway is a digital fashion platform that allows customers to rent, subscribe to, or buy designer clothing and accessories. Its primary offering is a subscription service, where customers pay a monthly fee for access to a rotating wardrobe. Renting rather than buying allows users to try designer fashion at a lower cost and with less waste.

The company’s business model depends on recurring subscription revenue and strong partnerships with clothing brands. To drive growth, it invests in expanding inventory, improving personalization through data, and streamlining fulfillment with proprietary logistics technology. Key success factors include growing the active subscriber base, maintaining high-quality inventory, and keeping operating expenses in check while enhancing the customer experience.

Quarter in review: Growth, margins, and expansion efforts

During the fiscal second quarter ended July 31, 2025, Rent The Runway’s revenue reached $80.9 million, climbing 2.5% year over year and just above management’s $76–$80 million revenue guidance range. Active subscribers at period end rose to 146,373, up 13.4% year over year, with total subscribers (including paused accounts) reaching 185,102.

Despite gaining more users, profitability measures declined sharply. Gross profit fell by a quarter to $24.3 million, mainly due to a steep drop in gross margin from 41.1% to 30.0%. The company reported an adjusted EBITDA of $3.6 million, sinking from $13.7 million in the second quarter of fiscal year 2024. The net loss widened to $(26.4) million, substantially more than the $(15.6) million net loss in the prior-year period. Management attributed these results to high costs from rapid inventory expansion and increased fulfillment expenses.

Brand partnerships expanded rapidly in the first half of fiscal year 2025. Revenue share units from existing partners grew 40% year over year, while total revenue share units soared 119% year over year in the first half of fiscal year 2025. Fifty-six new brands joined the platform in the first half of fiscal 2025, with plans for more by year end. Seven exclusive brand collaborations also launched in the period, underlining the company's push for variety and exclusivity. These efforts underpin Rent The Runway’s “closet in the cloud” concept—a digital closet filled with designer options on demand.

The company nearly doubled the number of inventory units and posted notably more clothing styles each month compared to last year, with May, June, and July inventories up 323%, 235%, and 253%, respectively, over prior-year levels. Enhanced customer experience features, such as a redesigned personalized home screen and a new rewards program, were introduced, and Net Promoter Score was up 77% year over year. However, the fulfillment and technology costs rose, and overall operating expense intensity left gross margins and profits under pressure.

Looking ahead: Guidance and investor watchpoints

Management guided for fiscal third quarter revenue between $82 million and $84 million, which would be a sequential increase from the current quarter. Adjusted EBITDA margin is expected to range from (2)% to 2%, implying little or no improvement in profitability for now. Full-year guidance remains in place for double-digit subscriber growth for fiscal 2025, but the company warned that free cash flow (non-GAAP) for fiscal 2025 will be lower than $(40) million, citing costs related to a crucial recapitalization plan.

Rent The Runway highlighted a pending financial recapitalization, which, if completed, will significantly reduce its outstanding debt—from $340 million to $120 million—and inject $20 million in new cash. Until that deal closes, the company will continue to face pressure from negative free cash flow, shrinking cash reserves, and high debt. Investors may want to track margin trends, the retention impact of recent price increases, progress on the recapitalization, and whether subscriber momentum can eventually deliver sustainable profits.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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