Shares of Rent the Runway fell more than 22% before Wall Street rang on Tuesday, as many Americans halted their subscriptions to the clothing rental company as they felt the pressure of hot inflation.
Rising gasoline and grocery prices have forced shoppers to limit spending on clothing and other discretionary items, denting sales for clothing companies just beginning to recover from the pandemic amid the pandemic. supply chain problems are eased.
Rent the Runway lowered its annual sales forecast late Monday and said it will cut about 24% of the company’s workforce as it seeks to rein in costs.
“Consumers are not viewing (Rent the Runway) as a way to save money compared to the traditional wardrobe ownership model… rather, consumers are protecting household budgets by eliminating eliminate recurring monthly discretionary fees like RENT,” Credit Suisse analyst Michael Binetti wrote in a note.
At least five brokerages have cut their price targets on the stock, with Credit Suisse lowering their ratings to “neutral” from “better”.
Rent the Runway reported 124,131 active subscribers at the end of the second quarter, down 8% from the previous three-month period, citing the company to blame an increase in the number of people pausing or opting out. their registration deadline.
Active subscribers are still up 27% from a year earlier.
The company said that while it saw subscriber numbers rebound in August and September, it remains difficult to predict how consumers will behave given the uncertain macro backdrop.
“It’s clear to us that our customers living, working, socializing and commuting in 2022 are different than they were before the pandemic,” CEO Jennifer Hyman said on a call with analysts.
“We’re still learning how these kinds of changes in customer behavior impact the business, especially in a challenging macro environment.”
Shares of the company were down 22.9% at $3.80. They have an average price target of $8.50, according to Refinitiv data.
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