Rent the Runway names Paige Thomas CEO, lifts revenue guidance

Rent the Runway (NASDAQ: RENT ) released second-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below. This content is powered APIs. For comprehensive financial data and transcripts, visit View the webcast at Summary Rent the Runway announced Paige Thomas as the new CEO, effective September 14, 2026, succeeding interim CEO Terry Barackwit.

The company reported $98 million in revenue for Q2 2026, marking a 21% increase over the previous year and setting a company record. Strategic initiatives focus on total customer growth, profit expansion, and operational excellence, emphasizing the enhancement of the customer experience and merchandise offerings. Operational adjustments include pausing Marketplace and on-site advertising efforts to concentrate on rental and selling priorities. The company achieved a 600 basis point improvement in gross margins, driven by efficiencies in product and fulfillment costs.

Management reaffirmed guidance for double-digit revenue growth and adjusted EBITDA of 4% to 7% for fiscal year 2026. A rights offering backed by investors is planned to raise $15 million, ensuring liquidity and support for operational plans. Notable features like Outfit Generation and virtual try-ons have been implemented to improve customer engagement and discovery. Full Transcript OPERATOR Welcome to Rent the Runway's second quarter 2026 earnings results conference call.

As a reminder, this call is being recorded. I would now like to turn the call over to Rent the Runway's Chief Legal & Administrative Officer, Cara Schembri. Thank you, Cara. You may begin.

Cara Schembri, Chief Legal & Administrative Officer Hello everyone and thanks for dialing in today. We would like to remind you that this call will include forward-looking statements. These statements include guidance and underlying assumptions for the third fiscal quarter of 2026 and the fiscal year 2026 and statements regarding our business strategies and initiatives, inventory plans, execution and progress against our goals, and leadership transition. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially.

These risks, uncertainties and assumptions are detailed in today's press release and in our Form 10-Q. We have no obligation to update any forward-looking statements or information except as required by law. During this call we will also reference certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Reconciliations of GAAP to non-GAAP measures can be found in our press release and in our SEC filings. And with that I'll turn it over to Terry Barackwit, our interim CEO. Terry Barackwit, Interim CEO Thank you, Cara, and thank you all for joining today. Before we turn to the quarter, I want to share an important update on our leadership.

This morning we announced that Paige Thomas has been appointed as Rent the Runway's Chief Executive Officer, President and a member of our Board of Directors effective September 14th. Paige brings 30 years of retail leadership experience with a track record of driving growth at premium and off-price brands alike. She joined Rent the Runway in June of 2026 as our Chief Commercial Officer after serving as Chief Merchant and Product Innovation Officer at Signet Jewelers and as President and CEO of Saks Off Fifth Avenue. Earlier she spent more than a decade at Nordstrom, including five years leading Nordstrom Rack.

The bar we set for this role was high and it was specific: someone who understands the premium customer and fashion brands she loves, someone who has operated at scale and someone who will lead and accelerate the strategy this team is already executing. That is Paige. With Paige stepping in as our permanent CEO, I will move into the role of non-Executive Chair of our board, also effective September 14th. Paige and I will work closely together as we transition into our new roles, ensuring the strategy and momentum we've built continues.

I also want to thank Darren Fonteca for his service as Executive Chairman through this period of transition. He's been a steady partner to me and to the board and the company is better for it. Now to the business. Through all of this change, our foundation holds.

It starts with a customer at the center and the core rental business she comes to us for. Over the past few months, we've listened to her feedback, analyzed the data and evaluated how we work. As a result, we've refined how we serve her and we're clearer than ever on our strategy. Rent the Runway is a premium fashion service platform.

We exist to give her access to premium fashion whether she is renting or buying, guided by styling intelligence that helps her find and wear what fits her life. And we give brands and partners exposure to highly valued, highly engaged customers. Our strategy is supported by three operating priorities: total customer growth, profit expansion and operational excellence. First, total customer growth is built on being a fashion authority and delivering an experience she trusts.

In practice, that means the best merchandise offer, from everyday workwear to the aspirational brands she asks for by name, realized through strong brand partnerships. And it means an even more seamless experience: availability, discovery and access to product on her terms. She subscribes to expand her closet for everyday wear. She reserves for the moments that matter most in her life.

And increasingly she wants to buy from us. She experiences all of it as one relationship with one company, and we are building the business to match. Second, margin expansion is about bringing more discipline to how we drive profitable revenue. That includes how we use pricing and promotions and how we manage inventory to turn it faster and earn the greatest return on our largest investment, the product itself.

Third, operational excellence is about disciplined execution, delivering the plan we set and the promise she is paying us for. This is what separates the retailers that last from the ones that do not. It is the garment arriving clean, on time and in the condition she expects every single time. Across the hundreds of thousands of items moving through our operations, we hold ourselves to that standard on every order.

Now to the quarter. Our customers' feedback has been consistent, and we aim to always deliver on the promise she comes to us for: the right merchandise, easy to find, in stock when she needs it and in the condition she expects. So we are concentrating our resources toward improving our execution on rental and selling. That focus means we have paused select pilots that do not directly serve those priorities today.

First, we paused Marketplace, and we believe that it can be meaningful in our future once the experience is fully integrated. We paused on-site advertising and monetization to prioritize a premium experience. And we are not pursuing new B2B dry cleaning partners; we will continue to serve the one we have. These are choices about focus and sequencing, and by concentrating our resources we expect to improve execution and results.

For the second quarter, we delivered $98 million in revenue, ahead of the range we communicated in June. We also delivered meaningful margin improvements as we focused on operational efficiencies and alternative inventory models. Dave will take you through the financials in more detail shortly. Total customer growth depends on fashion authority, brand trust and a seamless customer experience.

To strengthen our fashion authority in the quarter, we introduced new brands and went deeper into the categories she requests most to deliver a relevant summer offer. For example, we expanded beach cover-ups from 12 brand partners to 25, growing the category 75% over last year. She continues to respond to newness, with recent additions like La Ligne, Jenni Kayne alongside refreshed prints from Marimekko, all delivering above-average utilization. Looking to fall, she will experience a diverse assortment including new brands and new collaborations weighted more heavily than last year toward the brands and categories she requests most.

Whether she's heading into the office, working from home or getting ready for a fall wedding, she has told us how much the Reserve experience matters. It's where she comes to us for the key moments in her life. It carries the highest satisfaction scores and we are investing in it, including category expansion. We will share more on those results the next call.

The goal is simple: more of what she wants with even more newness throughout the season. At the start of 2026 we said we would deliver features to improve her discovery experience, and we have been delivering. In May we piloted Outfit Generation and by the end of June it was live for every customer. She no longer has to imagine what to wear.

Together we show her the complete look. Engagement with this feature in our app is running at 35%, ahead of our expectations, and it is changing how she engages with us. During the pilot, customers with the outfit experience added to the bag 12% more often than those without it, and 77% of the time she opened another item within the look. In August, we rolled out avatars within the outfit experience so that she can see recommended looks on a range of figures, and we began highlighting virtual try-ons so that she can see how a specific item will look before she rents or buys.

Over the past five months we've launched personalized carousels, updated imagery, outfit generation and virtual try-on. Together they represent a real shift in how she discovers product. She can find an item, picture herself in it and see the whole look together. Looking forward, we are building our 2027 plan now.

Guided by transformation and focus, we have more clarity than ever before about our customer, the services and experiences she wants and the value that we offer to both her and to our brand partners. We have a deep conviction that there is meaningful opportunity to grow revenue and profit by deepening our relationship with the customer we already have, by growing new customers and through disciplined execution. As a reminder, last fall we recapitalized the business in a transaction led by Story3 Capital Partners, Nexus Capital Management and Randa Principal Strategies.

These investors continue to have confidence in our strategy and growth plan, and we are actively working with them on the funding to support. Today we announced our plan to launch a rights offering to holders of our Class A common stock, backstopped by these investors for $15 million to support the company's operational plans and liquidity. This is the plan Paige is coming in to lead. The strategy is set, the team is in place and the work is underway.

I am proud of the work to date and excited about the work ahead. We have made real progress securing more of the assortment that she wants, building discovery experiences that help her see herself in the product and improving the consistency of her experience throughout. We will keep pushing on all three of these. Serving as interim CEO and President has been truly a privilege and I could not be more confident in our strategy, in this team and in Paige as the leader to carry it forward.

With that, I will turn it over to Dave. This is Dave's first earnings call with us, and in the three months he's been here he has brought a true rigor into this business that I have valued enormously. Dave Loretta, Interim Chief Financial Officer & Treasurer Thank you, Terry. Let me start by saying how pleased I am to be on the call today.

I joined Rent the Runway as interim CFO three months ago with a strong belief in the potential of the Rent the Runway brand, the significant opportunities to drive margin improvement and our commitment to building a stronger financial foundation in the current dynamic environment. I believe this company is well positioned to reaffirm its authority in the fashion industry while strengthening our operating discipline to deliver improved financial results. Turning to performance, in the second quarter we delivered $98 million in net revenue, an all-time record for the company. We grew revenue 21% over Q2 of last year and 9% sequentially over the first quarter.

Our top line reflects healthy quarter-over-quarter growth in revenue per subscriber and increased add-on revenue that continues to build as we've invested in new ways to provide flexibility and choices in her monthly subscription offering. The subscription price increases that were effective August 1st of last year have contributed to the revenue growth and driven flow-through to better bottom line results. Our other revenue line, inclusive of resale, grew 19% over Q2 of last year, which we believe represents a significant growth opportunity for our business.

Drawing on the large and growing demand for resale apparel, our data demonstrates that both subscribers and new visitors see tremendous value in our merchandise assortment, and when we price our pieces for resale, we aim to make room for more newness in the offering and drive higher gross margins. From a gross margin expansion standpoint, Q2 improved roughly 600 basis points. We leveraged both product costs and fulfillment costs to support the second quarter margin expansion.

Our discipline in controlling G&A costs while maintaining similar investment levels to last year in key technology initiatives and marketing has added approximately 1000 basis points of leverage in the second quarter, resulting in significant year-over-year improvement in our operating profitability. Consistent with what we noted on the first quarter call, the year-over-year growth in ending active subscriber count decelerated in Q2, primarily due to our stronger promotional activity last year and a higher rate of pause activity this year.

As we continue to measure the efficiencies of our growth investments, we are focusing the mix of marketing spending and promotions with a goal to drive customers to our platform that are profitable. Collectively, we remain confident in our full year outlook for revenue growth and earnings performance, as evidenced by affirming the full year guidance on net revenue and adjusted EBITDA. In addition, we continue to expect improved free cash flow in 2026 compared to last year. Our liquidity position has strengthened with a $10 million term loan as detailed in the third amendment to our credit agreement with the same investor group that led our 2025 refinancing.

This provides both operating flexibility and investment dry powder. In addition, with the backstop rights offering that we announced today, we plan to launch an equity raise in the amount of $15 million to further bolster our liquidity position and support ongoing growth. The vote of confidence by our investor group sends a positive message and underpins our three-prong operating approach that focuses on, first, growing our customer base; second, improving our profitability; and third, executing with discipline. As Terry stated, we believe that our key to success lies in refocusing on these fundamentals.

Now I'll review our second quarter results before providing an update on Q3 and the full year guidance. 8% year over year. Average active subscribers during the quarter were 148,259, an increase of 1% year over year. The decrease in ending active subscribers was driven primarily by a year-over-year increase in the rate of pause and the year-over-year decrease in the number of subscribers acquired due to the stronger use of promotions in 2025, which we have reduced this year over.

7% quarter over quarter. 6 million, or 21% year over year, primarily due to higher average revenue per subscriber driven by the subscription price increase effective August 1st of last year and an increase in the volume of add-on bookings. This was partially offset by lower Reserve revenue versus Q2 of last year. 8% year over year, primarily due to significantly higher resale revenue.

8% last year. This decline in the percentage of revenue was primarily due to higher revenue per order, partially offset by higher transportation and warehouse processing costs. 1% in Q2 versus 30% last year, representing a 609 basis point improvement. This is primarily due to the rental product depreciation and revenue share costs that decreased 240 basis points as a percentage of revenue from last year and fulfillment expenses that decreased 370 basis points from last year.

Second quarter operating expenses were 2% lower year over year due to lower G&A expenses. 7% of revenue last year. 4% of revenue, in Q2 of last year. 9 million in year-to-date 2025.

The improvement versus prior year was primarily due to lower inventory-related capital expenditures as well as increased operating income, partially offset by less working capital benefits.