Rent the Runway's Q2 2026: Contradictions Surface in Recapitalization, Debt Reduction, Inventory Strategy, and Subscription Pricing

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $80.9M, up 2.5% YOY and up 16.2% sequentially
• Gross Margin: 30%, versus 41.1% in Q2 2024 and 31.5% in Q1 2025

Guidance:

• Q3 revenue expected to be $82–$84M.
• Q3 adjusted EBITDA margin expected between -2% and 2% of revenue.
• FY2025 ending active subscribers expected to grow double digits year over year.
• FY2025 free cash flow expected to be lower than -$40M, primarily due to recapitalization transaction costs.
• Company plans to continue investing in inventory while prudently managing spend.

Business Commentary:

* Subscriber Growth and Retention: - Rent the Runway ended Q2 with 146,400 active subscribers, marking a 13.4% year-over-year increase. - The acceleration in subscriber growth was driven by an improved inventory experience, increased product innovation, and a better connection with the core customer.

• Inventory Strategy and Customer Experience:
• The company added 2,200 new styles and 56 new brands in the first half of 2025.

• This expansion in inventory offerings led to an increase in customer engagement, with share of views up 84% year-over-year, hearts per style up 15%, and new units at home up 57%.

• Recapitalization Plan and Financial Flexibility:

• Rent the Runway announced a recapitalization plan to reduce total debt from over $340 million to approximately $120 million.

• This transaction, involving a partnership with Aranda Principal Strategies and private equity firms, is expected to strengthen the balance sheet and inject fresh capital into the business.

• Price Increase and Customer Experience:

• For the first time in three years, the company increased subscription plan prices by an average of $2 per item, with the most popular plan increasing by 14%.
• This price increase was to account for inflationary pressures and tariffs, allowing for an exceptional customer experience while remaining competitive in the fashion industry.

Sentiment Analysis:

• Revenue grew 2.5% YOY to $80.9M, but gross margin fell to 30% (vs 41.1% prior year) and adjusted EBITDA declined to $3.6M (4.4% margin) from $13.7M (17.4%). Active subscribers rose 13.4% YOY. Q3 outlook calls for $82–$84M revenue and EBITDA margin of -2% to 2%.