Rent the Runway to cut workforce despite improving profits
Rent the Runway announced on Monday record sales for the second quarter ending July 31, coinciding with the news it plans to reduce its workforce by nearly a quarter, in bid to cut annual operating expenses.
The New York-based company said its second-quarter revenue totalled $76.5 million, a 64% increase year-over-year from $46.7 million in the second quarter of fiscal year 2021. The luxury platform's active subscribers were also up 27% year-over-year to 124,131 from last year, while total subscriber numbers grew 37% to 173,321.
For the three months, the company reported a net loss of $33.9 million, narrowing from of net loss of $42.4 million in the second quarter of fiscal year 2021. Adjusted EBITDA was $1.8 million, as compared to a loss of $1.9 million.
Despite the improving profits, Rent the Runway on Monday revealed a restructuring plan "to reduce costs, streamline its organizational structure and drive operational efficiencies."
The plan includes total workforce reductions of approximately 24% of corporate employees, reorganizing certain functions and reallocating resources to continue "to focus on customer experience and growth initiatives."
The company said estimates that it will incur total cash charges for employee severance and related costs of approximately $2.5 million and certain immaterial non-cash charges associated with stock-based compensation, both of which are expected to be primarily recognized in the third quarter of fiscal 2022.
However, the restructuring plan is expected to generate annual operating expense savings of $25 to $27 million, in fiscal 2023.
"We achieved two significant milestones in Q2, with both record quarterly revenue and positive adjusted EBITDA, ahead of the timeline we had outlined, and despite an uncertain environment,” said Jennifer Hyman, CEO and co-founder of Rent the Runway.
“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. 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."
All layoffs will be finalized by the end of the fourth quarter, the company added.
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