Rent the Runway shares triple after upbeat revenue forecast on AI bet

By Thomson Reuters Apr 11, 2024 | 11:14 AM

By Ananya Mariam Rajesh

(Reuters) – Shares of Rent the Runway more than tripled on Thursday as the apparel rental firm bets big on artificial intelligence tools to power its growth in the current year following a bleak 2023.

The rental firm expects revenue to grow between 1% and 6% in the current fiscal year, compared with a 0.6% rise in 2023, and forecast breakeven free cash flow.

The company is trying to attract customers by using AI models to assist its search and product tools in finding the right fit.

“Rent the Runway has just become the poster girl for investors that believe AI can help small business and not just large behemoths,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Last week, the company announced a one-for-20 reverse stock split to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq.

Following the move, it now has a free float of about 2.6 million shares, according to LSEG data.

Shares of Rent the Runway were trading at $18.94, giving it a market capitalization of about $67 million.

Rent the Runway, which went public in 2021 and focuses on selling designer brands, had seen a hit in demand due to quality issues and outdated product assortments.

CEO Jennifer Hyman said customer loyalty rate in the fourth quarter was up 10% year-over-year and the company has planned new designer launches for 2024.

“The 10% boost in loyalty that they saw is hugely significant … The speculation is that they can now use their digital tools to bring back old and find new customers for their platform and reinvigorate growth,” Schulman added.

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Ravi Prakash Kumar)