A recession may be coming, but consumers still want to look fashionable. Subscription clothing service Rent the Runway reported a more than 30% increase in third-quarter sales after the closing bell on Wednesday.
Actions of rent the track shot up 60% on the news. But the company still isn’t exactly a picture of financial health, posting a net loss of $36.1 million last quarter.
A prominent Wall Street analyst was impressed with Rent the Runway’s earnings.
Goldman Sachs analyst Eric Sheridan called the company a “leader in the subscription-based effort to drive adoption of the sharing economy theme in the apparel industry.” Sheridan reiterated his “buy” rating on the shares, as well as his $6 price target, which is nearly triple the current share price of around $2.18.
But Rent the Runway shares have plunged nearly 75% this year, even after accounting for recent gains. The company announced a restructuring in September, laying off 24% of its staff in the process.
“As we noted last quarter, the macroeconomic environment remains difficult and has had an impact on our business,” Rent the Runway chief financial officer Scarlett O’Sullivan said on a conference call with analysts on Wednesday.
Still, the company is hopeful of a quick turnaround, and Rent the Runway plans to offer even more clothing available for rent to its more than 175,000 subscribers.
“We are choosing to be opportunistic and take advantage of the current retail slowdown to purchase attractive inventory from our brand partners at discounted prices,” O’Sullivan said on the conference call.
But Rent the Runway rival Stitch Fix
(SFIX) it hurts too. The company reported a higher-than-expected loss on Tuesday and sales that missed forecasts. He also announced layoffs in June. The shares are down 80% this year, but shares were up 5% on Thursday thanks to strong results from Rent the Runway.