Rent the Runway will lay off nearly one-quarter of its corporate employees as it seeks to deal with a decrease in active subscriptions in fiscal Q2 2022, which ended July 31, 2022, compared to fiscal Q1. Active subscribers decreased from approximately 135,000 to 124,000, and the number of paused subscriptions increased from around 42,000 to 49,000. Despite the decrease, the number of active subscribers was still 27% higher than the 97,614 figure from the same period in 2021.
“The restructuring plan we announced today underscores our commitment to building RTR into a business that is highly profitable, has strong margins, and is self-funding,” said Jennifer Hyman, CEO and Co-founder of Rent the Runway in a statement. “These actions are intended to accelerate our path to profitability, while allowing us to continue to deliver more value to our customers and drive strong revenue growth.”
The restructuring plan focuses mainly on a reduction in workforce, with some closures of open roles and reduced backfills, as Rent the Runway reorganizes to focus on customer experience and company growth. While the company expects employee severance and related costs to total approximately $2.5 million, it expects to save $25 million to $27 million in operating expenses during FY 2023.
“We believe the $25 million–$27 million in anticipated annualized fixed cost savings we’ve announced help ensure RTR can navigate potentially rougher macro conditions, while also allowing us to significantly improve our medium-term profitability,” said Scarlett O’Sullivan, CFO of Rent the Runway in a statement. “As a result, we are raising our annual Adjusted EBITDA margin outlook and accelerating our timeline to self-fund. Over the medium-term, we believe we can generate 15% profitability on Adjusted EBITDA after product depreciation.”
Shares for Rent the Runway, which went public in October 2021, trading under RENT, were down approximately 30% on Sept. 13 following news of the company’s restructuring plans.