It pioneered clothing rental when founded back in 2009, but the Covid 19 pandemic was not kind to Rent the Runway and it had struggled since its public listing.
In a move to cut its debt and enhance its balance sheet, Rent the Runway has agreed to give a controlling stake to private equity players Aranda Principle Strategies (APS) and others, in a move that will wipe over $240m in debt from the company. Its shares rallied significantly yesterday on the news, although they still remain down over 30pc on 2024.
The agreement with lender APS will also see it and private equity firms Story3 Capital partners and Nexus Capital Management pump $20m into the company, while it will give the company breathing space of several years to pay down the remaining $120m debt, according to a statement from the company.
According to Bloomberg, the deal sees 86pc of the equity go to the three players, before accounting for a management incentive plan and a rights offering that will allow existing stock holders to buy up to $12m in shares.
Rent the Runway’s subscriber model very much targeted chic occasional and work wear, so when the pandemic hit and so many turned to casual and sportswear, its fortunes suffered significantly and it had never recovered. As many users return to the office and the circular economy continues to be in vogue, CEO and co-founder Jennifer Hyman is hoping to turn its fortunes around without the burden of massive debt repayments and interest.
“Rent the Runway has executed a significant and successful strengthening of the business over the past 18 months,” said Hyman. “We brought the business to nearly free cash flow breakeven in 2024, continued to transform the way we acquire inventory with an asset-light model, and returned to a culture of customer obsession, which is driving meaningful customer growth.”
“I’m proud that APS, Story3 and Nexus see tremendous upside potential and are partnering with us to improve our balance sheet. Their partnership will allow us to grow in a more sustainable, healthy way and take advantage of the significant market for rental that continues to expand across the US.”
This “asset light” model has seen Rent the Runway move from ownership of its own inventory into doing deals with big brands, where revenues are shared. A statement from Rent the Runway says it ended quarter one of 2025 with 147,000 active subscribers, “a record high”, and saw its strongest customer retention in four years.
CEO of APS, Nicolas Debetencourt, praised Hyman’s leadership and said he believed the company was “well positioned to drive long-term value as the category-defining leader.”
Don’t miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic’s digest of need-to-know sci-tech news.
