Popular Fashion Retailer Likely To Declare Bankruptcy

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This year, a number of major retailers have declared bankruptcy. Rite Aid recently filed and Bed, Bath & Beyond, Tuesday Morning and Christmas Tree Shops wound up closing all their stores amid their bankruptcies. Well it seems like 2024 will see more companies following suit and experts have identified one that they think will very likely be bankrupt next year - it's the popular fashion rental company Rent The Runway.

The company's stock has lost 96% of its value since it went public in 2021, and things have gotten so bad for them that credit reporting agency CreditRiskMonitor, which predicts the likelihood of bankruptcy in the next 12 months, has given Rent The Runway their worst ranking possible. After examining the company's financials, they assigned Rent The Runway a 1, which means there is a 10% - 50% chance the retailer will need to declare bankruptcy in the next year. The scores have a 96% accuracy rate, so it is pretty concerning.

On the surface, it might seem surprising that Rent The Runway would be struggling since many consumers have tightened their wallets and might be more interested in renting new items instead of buying them. Well there actually has indeed been a lot of demand for dress rentals, but Rent The Runway has struggled to meet it, losing them customers. Now, they also have to fend off competitors, like the very quickly growing Nuuly, created by Urban Outfitters.

Rent The Runway's CEO, Jennifer Hyman, knows that growing the number of subscribers is a priority, and that to do that, the company needs to have a lot of inventory available. At a recent earnings call, she stated, "In a fashion rental business, availability changes moment to moment, and we have observed that new customers are more likely to be disappointed by lower in-stock rates because they expect to see the items they got excited about while browsing as a prospect." Hyman explained that they've been working to fix that and that they are also doing well retaining long-time customers, so perhaps they will be able to survive these hard times.

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