Rent the Runway executives thought people were ready to dress up again, but it looks like they were wrong

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Online clothing-rental platform Rent the Runway Inc. on Monday announced plans to lay off corporate staff after declining summer demand and the remote-work trend ends, and shares closed 20 in after-hours trading. decreased by more than %.

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“Since mid-June, we have seen an increase in subscriber pause rates and a decrease in retention, as well as delays in rejoining former customer histories,” said chief executive Jennifer Hyman on Rent the Runway.

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Second Quarter Earnings Conference Call on Monday.

The number of active subscribers stood at 124,131 in Q2 as compared to 134,998 in the previous quarter. Analysts were expecting an average of 1,44,000 customers, according to FactSet. Rent the Runway said the cut was intended to protect itself against “potentially difficult macro conditions”.

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Just three months ago, officials expected to take advantage of shoppers rethinking their wardrobes as they returned to offices, concerts, dates, weddings and other social gatherings in the third year of the COVID-19 pandemic.

During Rent the Runway’s last earnings call, Hyman said customers were using cocktail dresses and black-tie dresses at a higher rate than at any point in the company’s history. She said customers were only visiting two or three times a week when returning to the office, meaning there was less reason to buy new work clothes. And she said shoppers were making more bold, more colorful fashion choices — beyond business suits and athleisures.

CFO Scarlett Brillette O’Sullivan had a separate update Monday, however, adding that “higher distance trends may have contributed to the demand impact we experienced this summer,” potentially reshaping seasonal membership patterns. To give.

In the second quarter, Rent the Runway reported quarterly sales of $76.5 million, up 64% from $46.7 million a year ago, compared to a loss of $33.9 million, or 53 cents per share. Analysts polled by FactSet expected Rent the Runway to lose 65 cents per share on sales of $73.6 million.

In their second-quarter earnings release, executives described the job cuts as part of a plan to reduce operating costs by $27 million in fiscal year 2023. In response, company leaders raised their annual adjusted-margin outlook, but lowered their full-year sales estimates.

According to the announcement, “We believe the $25M-$27M in projected annual fixed cost savings we announced can help RTR navigate potentially difficult macro conditions, while helping us improve our medium-term profitability.” Allows for considerable improvement in

Fares Runway executives said they expected to “substantially” complete the restructuring plan by the end of the fourth quarter.

Executives lowered their full-year adjusted EBITDA margin forecast from zero to negative-2, reducing their sales guidance to a range of $285 million to $290 million from the $295 million to $305 million forecast they provided in June. increased to % revenue.

Shares of Runway are down 54% so far this year, while the S&P 500 index SPX,
Has fallen 14.7%. After closing up 10% on Monday at $4.93, shares dived lower than $3.80 in after-hours session.

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