Rent the Runway Reports Record Q2 Revenue and Names New CEO

Rent the Runway Inc. (NASDAQ: RENT) reported record second-quarter 2026 revenue of $97.7 million, a 20.8% increase year over year. The company also announced that Paige Thomas will assume the roles of Chief Executive Officer, President, and Board Member effective September 14, 2026. Interim CEO Teri Bariquit will transition to a Non-executive Chair position as part of the leadership change.

Gross margin expanded by 609 basis points to 36.1%, driven by lower product depreciation and fulfillment costs relative to revenue. Adjusted EBITDA rose to $12.6 million, or 12.9% of revenue, compared to $3.6 million in the prior year period. These figures reflect improved operating leverage as the company focuses on core rental and resale operations while pausing non-core pilots.

Margin Expansion Driven by Operational Efficiency

The profit improvement stems from a 240 basis point reduction in rental product depreciation and revenue share costs as a percentage of revenue. Fulfillment expenses also decreased by 370 basis points, a result of higher revenue per order and operational efficiencies. Revenue growth was primarily fueled by higher average revenue per subscriber following an August 2025 price increase and increased add-on bookings.

Other revenue streams, including resale, grew 18.8% year over year. The company is leveraging new discovery features such as outfit generation and virtual try-ons to drive engagement. App engagement reached 35%, with add-to-bag rates up 12%, enhancing the overall customer experience and supporting the premium fashion service model.

Subscriber Base and Cash Flow Challenges

Despite revenue growth, active subscribers declined 3.8% year over year to 140,826. This decrease resulted from increased account pauses and reduced promotional spending compared to the prior year. Free cash flow remains a concern, standing at negative $21.6 million year-to-date, although this represents an improvement from the negative $32.9 million recorded in the same period last year.

To support liquidity and growth plans, the company is relying on external funding sources. These include a $10 million term loan and a $15 million backstopped rights offering. The ongoing cash burn highlights the need for disciplined inventory management and pricing strategies to achieve long-term profitability.

Forward Guidance and Strategic Focus

For the third quarter of 2026, Rent the Runway guides revenue to between $87 million and $90 million. This range implies flat to 3% growth, marking a deceleration from the second quarter as the company laps subscription price increases from the previous year. Adjusted EBITDA for the third quarter is expected to be negative 3% to negative 6% of revenue, driven by seasonality and higher product costs from revenue share inventory.

Management outlined three operating objectives: total customer growth, margin expansion through disciplined pricing, and operational excellence in delivery. Teri Bariquit emphasized the focus on being a fashion authority and ensuring garments arrive clean and on time. The strategy remains centered on core rental and resale, with non-core initiatives paused to improve execution and profitability, according to the earnings call details reported by GN markets/earnings (en-US).