Rent the Runway (NASDAQ: RENT) Plunges As Q3 Outlook Disappoints

Shares of Rent the Runway (NASDAQ: RENT) plunged in after-hours trading on Monday as the shared designer closet platform’s outlook for Q3 and FY22 disappointed analysts.

In the third quarter, RENT has forecasted revenues to be in the range of $72 million to $74 million, below analysts’ estimates of $79.5 million while adjusted EBITDA margin is expected to range between 1% to 3%.

For FY22, Rent the Runway anticipates revenues between $285 million and $290 million, again falling short of Street estimates in the range of $295 to $305 million.

RENT’s Q2 Results

In Q2, the company delivered record revenues of $76.5 million, up 64% year-over-year and surpassing consensus estimates of $73.6 million. Net loss narrowed to $33.9 million in Q2 versus $42.4 million in the same period last year.

RENT’s adjusted EBITDA margin was 2.4% in Q2 as compared to an adjusted EBITDA margin loss of 4.1% in the Q2 of last year.

The company also unveiled a restructuring plan that would look at streamlining its organizational structure with a 24% reduction in corporate employees, reducing costs, and moving towards greater operational efficiencies.

Rent the Runway’s CFO Scarlett O’Sullivan stated, “We believe the $25M-$27M 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.”

As a result, RENT also raised its annual Adjusted EBITDA margin outlook from an adjusted EBITDA margin loss of 2% to breaking even. O’Sullivan added that over the medium-term, the company believes that it “can generate 15% profitability on Adjusted EBITDA after product depreciation.”

Is RENT Stock a Buy?

Analysts continue to be bullish about RENT with a Strong Buy consensus rating based on four Buys and one Hold.

RENT’s average price prediction of $9.50 implies that the stock has an upside potential of around 92.7%.