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    RENT
    Earnings call· Apr 2026(Q1 FY27)

    Rent the Runway Q1 FY27 earnings call RENT

    Jun 3, 2026 Source

    Executive summary

    Rent the Runway Q1 FY27 — Strong Revenue Growth and AI-Powered Discovery

    Rent the Runway delivered a strong Q1 FY27 with significant revenue growth, driven by successful inventory investments and an expanding add-on business. The company is focusing on AI-powered discovery and new revenue streams, including an online marketplace and advertising platform, while navigating a deceleration in subscriber growth and lower free cash flow. New leadership appointments aim to further commercialization and financial stability.

    Highlights

    5

    • Total revenue reached $89.9 million, growing 29.2% year-over-year and beating guidance of $85 million to $87 million.

    • Add-on revenue grew 70% year-over-year and 11% quarter-over-quarter, indicating strong customer engagement with assortment.

    • Adjusted EBITDA improved to negative $0.8 million (negative 0.9% of revenue) from negative $1.3 million (negative 1.9% of revenue) in Q1 FY26.

    • Fulfillment costs as a percentage of revenue declined to 26.2% in Q1 FY27 from 29.4% in Q1 FY26.

    • Ending active subscribers increased 5.8% year-over-year to 155,692, and average active subscribers grew 12.2% year-over-year to 149,744.

    Concerns

    5

    • Deceleration in year-over-year ending active subscriber growth in Q1 FY27 due to tough comparisons and strong promotional activity in the prior year.

    • Free cash flow was negative $13.6 million in Q1 FY27, lower than negative $6.4 million in Q1 FY26, primarily due to increased cash used in working capital and higher cash interest expense.

    • Gross margins decreased to 25.9% in Q1 FY27 from 31.5% in Q1 FY26, primarily due to higher revenue share costs as a percentage of revenue.

    • Macroeconomic and geopolitical environment remains highly uncertain, with potential impacts on transportation costs, fuel surcharges, and consumer confidence.

    • Uncertainty around customer reaction to passing along fuel surcharges this fiscal year.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2026 revenue growth
    double-digit growth
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    4% to 7% of revenue
    high materiality
    High
    Full-year 2026 rental product acquired
    $45 million to $50 million
    medium materiality
    High
    Q2 2026 revenue
    $91 million and $95 million
    high materiality
    Medium
    Q2 2026 Adjusted EBITDA
    5% and 8% of revenue
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Subscription and Reserve Rental Revenue
    Growth primarily due to higher average subscribers and higher average revenue per subscriber from an August 1 price increase, partially offset by lower reserve revenue versus Q2.
    		—25.3%——
    Other Revenue
    Increase primarily due to significantly higher retail revenue.
    		—60.5%——

    Operational metrics

    8
    Total revenue
    $89.9 millionup $20.3 million or 29.2% YoY; down $1.8 million or 2% QoQ
    Q1 FY27

    Beat guidance of $85 million to $87 million.

    Add-on revenue growth
    70%YoY
    Q1 FY27

    Driven by increasing percentage of subscribers engaging with add-on products.

    Ending active subscribers
    155,692up 5.8% YoY; up 8.3% QoQ
    Q1 FY27

    Deceleration in year-over-year growth compared to prior quarters due to tough comparisons and strong promotional activity last year.

    Average active subscribers
    149,744up 12.2% YoY
    Q1 FY27

    Compared to 133,468 subscribers in the prior year.

    Fulfillment costs
    $23.6 millionvs $20.4 million Q1 FY26; vs $21.6 million Q4 FY26
    Q1 FY27

    Declined as a percentage of revenue due to higher revenue per order, partially offset by higher transportation and warehouse processing costs.

    Operating expenses growth
    4.9%YoY
    Q1 FY27

    Primarily due to higher G&A expenses.

    Total operating expenses as percentage of revenue
    45.4%vs 55.9% Q1 FY26
    Q1 FY27

    Includes technology, marketing, and G&A.

    Adjusted EBITDA
    -$0.8 millionvs -$1.3 million Q1 FY26
    Q1 FY27

    Increase as a percentage of revenue primarily due to lower operating and fulfillment expenses as a percentage of revenue, partially offset by higher revenue share expenses.

    Industry KPIs

    3
    MetricValueDetails
    Sg a OPEX ratio45.4%%
    Gross margin drivers25.9%%
    Distribution supply chain cost economics$23.6 millionUSD

    Product announcements

    5
    ProductTypeDetails
    Personalized carouselslaunch
    AI imagerylaunch
    Outfit generationroadmap
    RTR Marketplaceexpansion
    BD dry cleaning service pilotlaunch

    Risks & headwinds

    7
    Deceleration in year-over-year ending active subscriber growthQ1 FY27 and H1 FY26

    Ending active subscriber growth was 5.8% YoY in Q1 FY27, a deceleration from prior quarters.

    Mitigation: Underlying business drivers remain strong, as evidenced by double-digit revenue growth guidance for FY26.

    Tough comparisons for subscriber growthH1 FY26

    Due to normalized marketing spending versus Q4 FY25 and strong promotional activity in the prior year.

    Higher additions to the POS subscriber baseQ1 FY27

    Partially offset higher subscriber acquisitions in Q1 FY27 versus Q1 FY26.

    Lower free cash flowQ1 FY27

    Negative $13.6 million in Q1 FY27 versus negative $6.4 million in Q1 FY26.

    Mitigation: Expect improvements in free cash flow for full FY26 versus FY25, as timing-related factors become less relevant. Debt amendment allows interest in kind through April 2027.

    Increased cash used in working capital and higher cash interest expenseQ1 FY27

    Primary drivers of lower free cash flow in Q1 FY27.

    Mitigation: Debt amendment allows interest in kind through April 2027 to manage cash interest expense.

    Macroeconomic and geopolitical environment uncertaintyOngoing

    Potential impacts on transportation costs, fuel surcharges, and consumer confidence.

    Mitigation: Guidance is based on current conditions and assumptions and does not contemplate material deterioration.

    Uncertainty around customer reaction to passing along fuel surchargesQ2 FY26

    Assumed in Q2 guidance.

    Mitigation: Guidance reflects this uncertainty; actual results may differ if conditions change.

    2 min read7 chapters

    Detailed Narrative

    01

    Leadership Transition and Strategic Continuity

    Teri Bariquit assumed the Interim CEO and President role in mid-May following Jennifer Hyman's departure. Bariquit, with 37 years of retail experience at Nordstrom, emphasized her conviction in Rent the Runway's core business strategy and health. She highlighted the importance of customer-centricity, strong brand partnerships, and operational transformation, affirming the company's foundational strength.

    02

    Inventory Transformation Driving Customer Engagement

    The inventory transformation executed in FY25 is yielding positive results, with strong Q1 FY27 revenue growth. The add-on business saw significant growth, up 70% year-over-year and 11% quarter-over-quarter, indicating customer satisfaction with the expanded assortment and membership flexibility. This success reinforces the strategy of providing the right products in the right quantities.

    03

    AI-Powered Discovery and Personalization Initiatives

    Rent the Runway is focused on enhancing customer discovery through AI. In April, personalized carousels were launched, resulting in an 11% increase in 'hearting' behavior for active subscribers. May saw the introduction of AI imagery to update outdated inventory visuals, leading to a 129% increase in item usage. Internal testing for outfit generation began in May, expected to roll out soon to suggest complete looks.

    04

    Expansion into New Revenue Streams

    The company is actively developing new growth initiatives, including an online marketplace, an advertising and media platform, and a B2B dry cleaning service. The RTR Marketplace, expanded in April, is showing encouraging early signals. The advertising business is gaining momentum with major partners, offering both media revenue and a channel for subscriber acquisition. A B2B dry cleaning pilot was launched in Q1, leveraging existing logistics infrastructure.

    05

    Key Financial Performance and Subscriber Trends

    Q1 FY27 revenue reached $89.9 million, a 29.2% increase year-over-year. Ending active subscribers grew 5.8% year-over-year to 155,692, while average active subscribers increased 12.2% year-over-year to 149,744. Adjusted EBITDA improved to negative $0.8 million, or negative 0.9% of revenue. However, the company noted a deceleration in subscriber growth compared to prior quarters due to challenging year-over-year comparisons.

    06

    Free Cash Flow Dynamics and Macroeconomic Headwinds

    Free cash flow for Q1 FY27 was negative $13.6 million, a decrease from negative $6.4 million in Q1 FY26. This was attributed to increased cash used in working capital, timing of📎 payments, and higher cash interest expense, partially offset by lower inventory-related capital expenditures. Management reiterated expectations for improved free cash flow for the full fiscal year, despite ongoing macroeconomic and geopolitical uncertainties impacting transportation costs, fuel surcharges, and consumer confidence.

    07

    Strengthening Leadership Bench

    Rent the Runway announced two key senior leadership appointments. Paige Thomas, a retail veteran from Signet Jewelers and Saks OFF 5TH, joined as Chief Commercial Officer on June 1. Dave Loretta, former CFO of The Honest Company and Duluth Trading Company, will join as Interim Chief Financial Officer and Treasurer on June 8. These appointments are expected to enhance the company's commercialization and financial leadership.

    AI-generated summary of the company’s earnings call. Not investment advice.