More Runway for Rent the Runway as the Company Refinances

by · WWD
Rent the Runway's CEO Jennifer Hyman.Courtesy

Jennifer Hyman is ready to take on the elephant in the room or, er, on the runway — the company’s ultra low stock price. 

Shares of Rent the Runway Inc., which Hyman leads as cofounder and chief executive officer, have traded as low as 43 cents this year, which she pins on concerns about the company’s debt load, including long-term debt of $300 million.

“We have refinanced and restructured our debt, which gives the company a high degree of financial flexibility going forward,” Hyman told WWD. “What we’re really doing is signaling to the overall market and signaling to our vendor partners, our strategic partners that Rent the Runway is here to stay.”

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Specifically, the company amended its credit facility with its existing lender, eliminating both payment-in-kind and cash interest for the next year-and-a-half and cutting the minimum liquidity covenant to $30 million from $50 million.

The CEO didn’t name the lender, but Rent the Runway’s last annual report showed the credit facility came from Temasek Holdings, the Singaporean sovereign wealth fund.

Hyman said the changes would save the company $66 million in interest payments over the next six quarters. 

“The reason why this stock price is the way it is is because we’ve had this balance sheet problem, it’s not because we’ve had this business problem,” Hyman said. 

Shares of Rent the Runway rose 8 percent to 67 cents on Tuesday, giving the company a market capitalization of $46 million before it laid out the refinancing.

After market trading showed no big changes, with an additional gain of 1.5 percent to the stock, but Hyman now has some extra space to make her case to investors. 

“This is a viable growing business,” the CEO said. “One that will break even [on a free cash flow basis] next year.”

Hyman said that investors could not look past the company’s balance sheet and so they didn’t spend much time assessing the actual business.

“There’s now a real path for the business to accrue equity value and also demonstrate the strength of its business model,” she said.

It’s been a difficult year of change for Rent the Runway, which pushed to improve its experience by giving renters a 25 percent increase in the number of items they could borrow at one time, but then found out it didn’t have the necessary depth of inventory.

Hyman said that as the inventory depth improved, customer satisfaction rose. 

“The strategy is working,” she said. “It gives us confidence going into 2024. The problems that we had related to flat growth this year were temporary.” 

In the third quarter, Rent the Runway’s net losses narrowed to $31.5 million from $36.1 million a year earlier. Revenues for the three months ended Oct. 31 slipped 6.3 percent to $72.5 million from $77.4 million.

The company has also been pushing growth higher up the price scale, launching The Vault this week, which focuses on the new category of luxury eveningwear.

“We are going to be a highly profitable business,” Hyman predicted.