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

Rentunder Holding AB

11/04/2024 17:08

By Ananya Mariam Rajesh
       April 11 (Reuters) - Shares of Rent the Runway  RENT. 
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issues and outdated product assortments.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)
 ((AnanyaMariam.Rajesh@thomsonreuters.com ; Twitter: https://twitter.com/AnanyaMariam;))