Rent the Runway, Inc. Q2 FY2026 earnings call

• Leadership Transition: Paige Thomas appointed as permanent CEO effective September 14, bringing extensive retail leadership experience; Teri Bariquit moves to non-executive chair.
• Strategic Focus: The company is concentrating on three operating objectives: total customer growth, profit expansion, and operational excellence, with a renewed emphasis on core rental and selling activities.
• Paused Initiatives: Select pilots including marketplace, on-site advertising monetization, and new B2B dry cleaning partnerships have been paused to prioritize premium experience and execution efficiency.
• Product & Technology Enhancements: Launched 'Outfit Generation' feature live for all customers with 35% engagement rate; introduced avatars and piloted virtual try-ons to improve discovery and conversion.
• Inventory & Assortment: Expanded brand partnerships (e.g., beach cover-ups grew 75% YoY); focusing on high-demand categories for Fall 2026 with deeper assortment and new collaborations.
• Liquidity & Capital Structure: Secured a $10 million term loan and announced a backstopped rights offering for $15 million to support operational plans and liquidity.

Total net revenue reached $98 million, an all-time record, representing a 21% year-over-year increase and 9% sequential growth. Rental revenue was $83.1 million (up 21% YoY), driven by higher average revenue per subscriber from price increases and increased add-on bookings, partially offset by lower reserve revenue. Other revenue, inclusive of resale, grew to $14.6 million (up 19% YoY). Gross margin improved significantly to 36.1% from 30.0% in Q2 2025, a 609 basis point expansion, aided by lower product depreciation and fulfillment costs as a percentage of revenue.

• Full-Year 2026 Revenue: Reiterated guidance for double-digit revenue growth.
• Full-Year 2026 Adjusted EBITDA: Reiterated guidance of 4% to 7% of revenue.
• Full-Year 2026 Rental Product Investment: Revised upward to $53–55 million (from prior $45–50 million) but down significantly from FY25's $75 million, reflecting flexible inventory acquisition strategies and stocking for key fall events.
• Q3 2026 Revenue: Expected between $87 million and $90 million, representing flat to 3% growth versus Q3 2025.
• Q3 2026 Adjusted EBITDA: Expected to be negative 3% to negative 6% of revenue, impacted by seasonal subscription pause activations and higher revenue share inventory costs.
• Subscriber Outlook: Expect active subscribers to remain roughly flat in the back half of 2026; resale revenue expected to continue growing.

• Subscriber Growth Deceleration: Ending active subscriber count declined 3.8% YoY due to increased pause rates and reduced acquisition from lower promotional activity compared to the previous year.
• Execution Risks: Operational excellence is critical; failure to deliver clean, timely, and correct items could damage customer trust and brand authority.
• Market Uncertainties: Forward-looking statements are subject to risks that may cause actual results to differ materially, including macroeconomic conditions and consumer spending habits.
• Dependency on Core Services: Strategy relies heavily on retaining existing customers and deepening relationships rather than aggressive top-line customer acquisition through broad marketing spend.

Q: Management noted pausing the marketplace pilot. Can you elaborate on the strategic reasoning behind this decision and how it impacts the long-term vision for the platform? / A: The marketplace was paused to concentrate resources on improving core execution for rental and selling, which are the primary value propositions for customers. Management believes the marketplace can still be meaningful in the future once the core experience is fully integrated and optimized, but current priorities require a sharper focus on the premium rental experience and inventory efficiency rather than diversifying into third-party seller models at this stage.