Rent The Runway Inc stock tumbled despite the company reporting first-quarter financial results in fiscal year 2023 that beat Wall Street earnings and revenue estimates.
For its fiscal 1Q ended April 30, 2023, the New York-based designer wear rental company posted a loss of $0.46 per share on revenue of $74.2 million. The consensus estimate was a loss of $0.48 per share on revenue of $73.2 million. Revenue grew 10.6% on a year-over-year basis.
Still, Rent The Runway stock tumbled over 19% to $2.27 on the Nasdaq in morning trade.
Rent The Runway said it expects fiscal 2Q revenue of $77 million to $79 million and continues to expect fiscal 2024 revenue of $320 million to $330 million. The current consensus revenue estimate is $81 million for the quarter ending July 31, 2023, and $325.68 million for the year ending January 31, 2024.
Focus on profitability
Clearly, Rent The Runway is experiencing strong revenue growth and has narrowed its losses dramatically from fiscal 1Q 2022, but in the current challenging stock market environment, investors have changed their stock weighting from favoring growth toward a greater focus on profitability.
Investors are aware that Rent The Runway's strong start to 2023 and quarter-over-quarter subscriber growth are still unlikely to make it a profitable company anytime soon.
“Given our financial transformation over the past several years, we believe we are in a strong position to invest the majority of resources into our strategy of improving the customer experience,” said Rent the Runway co-founder and CEO Jennifer Hyman.
"I’m proud of the momentum we’re continuing to drive across the business, and of our Q1 2023 financial results, where we beat on the top and bottom line."
Rent the Runway is disrupting the fashion industry and changing the way women get dressed through its Closet in the Cloud, the world’s largest shared designer closet.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive