One of the hardest-hit enterprises during the post-coronavirus new normal, Rent the Runway (NASDAQ:RENT) suddenly became the toast of Wall Street on Thursday. Following an impressive sales performance for its third quarter, RENT stock shot up 35% in the morning session before blasting into orbit, gaining 70% in the afternoon hours. Critically, the astounding performance provides a nuanced take on the consumer economy.
According to CNBC, Rent the Runway — which offers an e-commerce platform enabling subscribers to rent or buy fashionable apparel — posted a loss per share of 56 cents, matching the Street’s consensus expectation. However, on revenue, the company generated $77.4 million, up above the consensus view of $72.9 million.
Significantly, the sales tally represented a 31% lift from the year-ago period. As well, this year’s Q3 loss came out to $36.1 million, a favorable outcome compared to the loss of $87.8 million one year ago. Against weak consumer sentiment, the strong performance contributed to heavy interest in RENT stock.
Further, CNBC reported that “[i]ts active subscribers at the end of the quarter were up 15% from a year ago to 134,240. Total subscribers rose 17% from a year ago 176,167.”
Even better for RENT stock, the underlying company “now anticipates $72 million to $74 million in the fourth quarter. That range is higher than the $72 million anticipated by analysts, according to Refinitiv.”
In an interview with the business news agency, Rent the Runway CEO Jennifer Hyman stated that inflation sparked higher demand for its sharing economy service. “There’s no other place that the consumer can go to get as much financial value as she receives from our offering,” Hyman said.
RENT Stock Provides an Interesting Consumer Gauge
With concerns about a global recession rising, many observers turned to Rent the Runway as a gauge of consumer health. From this angle, RENT stock did not disappoint.
According to CNN, “Goldman Sachs analyst Eric Sheridan called the company ‘the leader in the subscription-based effort to drive the adoption of the sharing economy theme in the apparel sector.’ Sheridan reiterated his ‘buy’ rating on the stock as well as his price target of $6, which is nearly triple the current stock price of about $2.18.”
One major factor contributing to the success of RENT stock centers on post-Covid-19 normalization trends. With mitigation measures lifted, people have more reason to dress up for myriad occasions. As well, companies may recall their employees back to the office, sparking greater demand for higher-quality apparel.
Per Resume Builder, “66% of employers currently require employees to work from office.” However, the organization noted that “90% of companies will require employees to return to office in 2023.” Ratcheting up the pressure, “21% of companies will fire workers who do not return to the office.” Given this backdrop, it might not be surprising that RENT stock popped higher.
Still, it’s also worth noting that should the Federal Reserve continue to raise interest rates to combat stubbornly high inflation, a recession may materialize. That would be the true litmus test. While RENT stock stole the show on Thursday, it’s still down about 72% for the year.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
