Rent The Runway: Polished Clothing, Sloppy Financials

As the clothing rental company prepares to go public, its S-1 filing reveals a brand that’s high on style but short on substance

Kevin LaBuz
Marker

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Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

WTF Is Depreciation?

Nothing gets my heart racing like the phrase “the most ridiculous thing I’ve seen since WeWork,” so my palms got sweaty when I saw this Tweet:

All assets have limited lifespans. Trucks can only drive for so many miles. Computers and IT hardware become obsolete. When’s the last time you used a fax machine? Sweaters get holes in the elbows. Depreciation is how businesses account for the decrease in an asset’s value over time.

Rent The Runway’s (RTR) business model is buying a piece of apparel for $X and then renting it out as many times as possible, hopefully generating revenue multiples of $X. The company considers the clothing it rents out to be long-term productive assets. But styles change, mustard stains, and clothing doesn’t last forever. Like a truck or a factory…

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Kevin LaBuz
Marker

Head of IR & Corporate Development at 1stDibs. Previously finance at Etsy, Indeed, and internet equity research at Deutsche Bank. Find me on Twitter @kjlabuz.