Rent the Runway announced it will lay off about a quarter of its staff on Monday after the New York-based fashion rental company reported a net loss $33.9 million in the second quarter of fiscal year 2022.
The company described the move as a restructuring plan aimed at reducing costs in order to “streamline its organizational structure” and “drive operational efficiencies.”
The plan primarily includes total workforce reductions of approximately 24% of corporate employees, reorganizing certain functions and reallocating resources to continue to focus on customer experience and growth initiatives, Rent the Runway said in a statement.
The company said this move will incur total cash charges of approximately $2.5 million in employee severance and related costs. The company will also incur non-cash charges associated with stock-based compensation, both of which are expected to be primarily recognized in the third quarter of fiscal 2022.
Rent the Runway added that it expects this restructuring plan to be substantially completed by the end of the fourth quarter of 2022, and is expected to generate annual operating expense savings of $25 million to $27 million in fiscal 2023.
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Jennifer Hyman, CEO and co-founder of Rent the Runway, said in a statement on Monday that the restructuring plan “underscores our commitment to building RTR into a business that is highly profitable, has strong margins, and is self-funding.” She added that these actions are intended to “accelerate our path to profitability,” while allowing the company “to continue to deliver more value to our customers and drive strong revenue growth.”
CFO Scarlett O’Sullivan added that the anticipated savings due to these job cuts will “help ensure RTR can navigate potentially rougher macro conditions, while also allowing us to significantly improve our medium-term profitability.”
As a result, the company is raising its annual adjusted EBITDA margin outlook and accelerating its timeline to self-fund. “Over the medium-term, we believe we can generate 15% profitability on adjusted EBITDA after product depreciation,” O’Sullivan said.
This news comes nearly a year after the fashion rental platform became a public company. Rent the Runway sold 17 million shares on the first day of its IPO in October for $21 each, raising a total of $357 million.
The current stock price on Monday after the closing bell is $4.93.
