![]() ![]() ![]() I believe with a high degree of confidence that the probability of someone attempting to replicate what RENT has built in the US is fairly unlikely. It has spent over a decade and hundreds of millions of dollars developing proprietary systems and infrastructure to offer its service at scale. One of the most compelling reasons to like RENT in my view, is the company's infrastructure. Significant Moat with Partners & Logistics Investments That compares with a low-single-digit gain in the broader apparel industry. While resale only represented 11.7% of sales in 2021, it gives RENT the opportunity to tap into a potential $82 billion apparel-resale market, by 2026. RENT's breadth of offerings gives it an advantage over specialty-apparel and single-brand-owned rental models. Rental and resale are among the fastest-growing sectors, with the rental market projected to increase at a 19% CAGR during 2022-2026, according to GlobalData. apparel market, as more consumers look for ways to participate in the circular economy. Rent the Runway's rental and resale (re-commerce) model positions it well to take share from traditional retailers in the ∼$300 billion U.S. Re-Commerce Double-Digit Gains May Outpace Industry In 2020, millennials overtook baby boomers to become the largest adult cohort in America, with over $600 billion in spending power, according to Accenture. ![]() Of women in a Lab42 survey, 19% have rented clothing or accessories in the past, and 55% are open to the idea. About 73% of millennials are willing to pay more for sustainable goods, including apparel-rental plans. More consumers are shifting to rental or secondhand clothes when making buying decisions, especially younger ones, who tend to be more environmentally conscious and increasingly in search of variety, value and newness. which may aid sales momentum for the foreseeable future. Rent the Runway's approach to wardrobing through rental and resale resonates more with younger shoppers - a group that will dominate spending in the U.S. Circular Economy Attracts Younger Demographic For Amazon, it further extends its reach in apparel and secondhand, broadening the assortment for its shoppers. Moreover, Rent the Runway's partnership with to sell a selection of exclusive design and secondhand apparel from an online storefront is a positive move that can raise inventory turnover, increase visibility and help attract and grow its own subscriber base. Each additional piece is an extra $25-$29 in revenue. The company offers four, eight or 16 items a month, with plans ranging from $94-$235. In 3Q, 28% of subscribers added one or more paid items, in-line with previous strong rates. Rent the Runway has seen its members boost spending as they become more comfortable with renting, moving up in membership plans, and adding items to monthly plans. Its customizable subscription program, which debuted in 2020, can help increase revenue per subscriber and drive more profitable sales. Active subscribers propel the bulk of revenue, reaching 86.3% of total sales in 2021 vs. Rent the Runway's ability to convert existing reserve and resale customers to subscribers, while attracting new consumers, is key to driving sales through 2025. RENT's historical sales growth () Subscriber Base Drives Majority of The Revenue Additional catalysts are potential expansion abroad, a rising mix of exclusive collaborations with brands, a loyalty-plan launch, and a new wholesale pilot program for Rent the Runway's exclusive designs. This may be driven by adding active subscribers, which could reach over 250,000 in 2025 vs. Rent the Runway has a first-mover advantage in the apparel-sharing economy, given its ability to boost shoppers' purchasing power in a sustainable way by providing access to hundreds of brands through resale and rentals. $203 million in 2021, as the consumer environment normalizes. Rent the Runway revenue may surpass $500 million in 2025 vs. Why do I like RENT? Sales Can More Than Double Through 2025 I keep a Buy rating on Rent the Runway with an end of year price target of $5.6. I believe boosting its active user base and engagement is key to persistent double-digit growth till 2025. A reduction in fixed costs through restructuring can help keep adjusted EBITDA positive. The pent-up demand for events after resumption of normal life and more people returning to work are catalysts for the company's continued sales gains. Rent the Runway's ( NASDAQ: RENT) increasing subscriber base, robust product breadth and first-mover advantage, with a unique business model that provides consumers access to an unlimited closet, could offer room to expand. ![]()
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