Rent the Runway is a really cool idea for a business. The premise is that for most women it doesn't make sense to splurge hundreds of dollars on a dress or item of clothing that they are likely only going to wear once or twice to special occasions.
So Rent the Runway will — as the name suggests — send designer clothes to you to wear for one-off occasions... in exchange for, you guessed it, a monthly subscription.
Executing on that premise has built a substantial business. In its best year, it brought in more than $250m in revenue. But, just like Warby Parker (eyeglasses), Allbirds (shoes), and many, many other companies that have, or are looking to, go public — it doesn't make any profit. In fact, Rent the Runway has made an operating loss of about $30m per quarter for the last 10 quarters.
Understandably, the company was hit incredibly hard by the pandemic. Designer dresses and clothes were quite literally the last thing on anyone's wish list and in their defense, this chart might look a lot healthier in the parallel universe where COVID never happened.
In its IPO filings the company outlines that it thinks it can get 20 uses out of an item at about $27 per average use. With the items only costing ~$100 each that's a really profitable venture... on paper. Will people really pay $27 for a Gucci gown that's been worn 19 times by other people before? If they do, Rent the Runway will be a very big company.
