Rent the Runway Inc. (RENT) shares jumped more than 26% Friday after the fashion rental platform delivered a quarterly performance that had Wall Street doing a double take. The company didn't just beat expectations—it blew past them, posting revenue growth that suggests its turnaround strategy is actually working.
The numbers tell a story of genuine momentum. Third-quarter revenue came in at $87.6 million, up 15.4% year-over-year and crushing analyst estimates of $73.8 million. That's not a small beat; that's a statement. Management credits a three-pronged approach: growing the subscriber base, refreshing inventory with styles customers actually want, and cleaning up a balance sheet that had been weighing on the business.
Growth Where It Matters
The subscriber count climbed to 185,166, representing a 6.1% increase from the prior year. More impressively, management noted that subscribers actually grew 12% year-over-year when measured in Q3 specifically, pointing to accelerating momentum as the year progressed.
"Not only did we execute operationally on our stated goals to return to our customer-obsessed origins, reinvigorate our brand, and drive double-digit growth in subscribers (which were up +12% year-over-year in Q3); but we also restructured our balance sheet, closing the recapitalization transactions in October that offer improved financial flexibility to better position us for continued growth," said Jennifer Hyman, Co-Founder and CEO.
The inventory refresh appears to be paying dividends. Rent the Runway reported that inventory-related churn dropped nearly 30% year-over-year in the third quarter, suggesting customers are sticking around because they're finding what they want. The company added nearly double the new inventory to its platform this year and posted more than 1.5 times the number of new styles compared to last year.
The Profitability Trade-Off
Not everything improved, though. Gross profit edged down to $25.9 million from $26.3 million a year ago, while gross margin compressed to 29.6% from 34.7% in the prior-year quarter. Adjusted EBITDA fell to $4.3 million from $9.3 million last year, with the margin narrowing to 4.9% from 12.3%. The company reported earnings per share of $13.65 for the quarter.
That profitability squeeze reflects the investment phase of the turnaround—spending on inventory and marketing to drive growth. Cash and equivalents stood at $50.7 million at quarter-end, down from $77.4 million as of January 31, 2025. But here's the good news: long-term debt contracted dramatically to $159.1 million from $333.7 million over that same period, thanks to the October recapitalization.
Looking Forward
The guidance is where things get interesting. Rent the Runway expects fourth-quarter revenue between $85 million and $87 million, well above the $76.6 million analyst consensus. For the full fiscal 2025, the company projects revenue of $323.1 million to $325.1 million, crushing the $294.6 million Wall Street had penciled in.
"We look forward to continuing to delight our customers and to driving sustainable growth in the years ahead," said CFO Sid Thacker.
Rent the Runway shares traded up 26.82% to $7.138 following the earnings release, as investors rewarded both the beat and the optimistic outlook. The stock's enthusiasm suggests the market believes this fashion rental comeback story might have more chapters to write.
