Rent the Runway on Tuesday revealed a debt restructuring.
By amending its credit facility with existing lenders, the rental company extends the maturity timeline from October 2024 to October 2026, reducing cash interest payments (from 12 percent to 2 percent as of February then increasing to 5 percent on July 31) and freeing up more than $20 million in cash flow. The notice is disclosed in its regulatory filings, and companies take this action, in some cases, to ward off unknowns like bankruptcy and to double-down on profitability.
The move gives Rent the Runway — which entered the scene in 2009 — more strategic flexibility, a stronger financial profile and cash flow trajectory in the near term as it attempts to fund profitable growth (a task faced by a lot of resale and rental firms that went public).
“We are thrilled to close Rent the Runway’s 2022 fiscal year with this important milestone, yet another proofpoint of our commitment to balancing robust growth with profitability. The Amended Facility significantly improves our credit position and cash interest obligations over the next several years and, we believe, bolsters our path to free cash flow profitability in the medium term,” Scarlett O’Sullivan, chief financial officer of Rent the Runway, said in a statement.
Jennifer Hyman, Rent the Runway’s cofounder, chair and chief executive officer, previously told WWD that, “Rent the Runway is really resonating with our target customer despite the uncertain macroeconomic environment that we’re in right now.”
As of December, Rent the Runway’s active subscriber count rose 15 percent to 134,240. The steps the company has taken have resulted in a doubling of gross margins since 2019 to 41 percent in the third quarter of 2022. Through its services, customers can subscribe, rent items à la carte and shop resale from more than 800 designer brands.
Under this amended facility, Rent the Runway looks to build on previous cost restructuring efforts, such as reducing its fixed cost base, transforming the capital efficiency of its product acquisition and changing its subscription programs.
