Rent the Runway to Reduce Workforce as More Customers Pause Their Subscriptions

The announcement came as the company reported that despite revenue rising 64% in the second quarter from a year earlier, its active subscriber count unexpectedly dropped from the first quarter. It ended the July quarter with 124,131 active subscribers, representing an increase of 27% from a year ago, but lower than the nearly 135,000 reported in the first quarter.

The company first noticed more customers pausing or ending their subscriptions beginning in mid-June, at the same time that fewer former subscribers were rejoining, co-founder and Chief Executive

Jenn Hyman

said during a quarterly earnings call with analysts Monday. “It remains difficult to predict how customers will behave,” she said.

“It is becoming clear to us that our customers live, work, socialize and travel differently in 2022 than they did prior to the pandemic,” she said. “We are still learning how these types of changes in customer behavior impact the business, particularly in challenging natural environments.”

Shares in Rent the Runway fell 24% in after-hours trading to about $3.75. The company completed an initial public offering in October 2021 and its shares were priced at $21.

Many retailers, including

Target Corp.

and

Amazon.com Inc.,

have been squeezed by a rapid shift in buying behavior this year, as shoppers reacted to high inflation and adjusted to relaxing pandemic restrictions. The shift has prompted some online retailers and companies that support them to trim their employee ranks.

Much of Rent the Runway’s business prepandemic came from women shopping for work clothes, but this year 20% of rentals are work-related, Ms. Hyman said on the call. “If remote and hybrid work trends increase, our subscription business might become more socially- and casually-oriented, and we might experience more seasonal peaks and troughs,” she said.

The layoffs are part of a restructuring plan aimed at reducing $25 million to $27 million of annual operating costs in its next fiscal year, the company said. The plan involves reorganizing certain functions and reallocating resources, in addition to a workforce reduction, it said.

Revenue climbed to $76.5 million in the three months ended in July, ahead of analysts’ expectations of $73.6 million. It posted a loss of $33.9 million, or 53 cents a share, compared with a loss of $42.4 million, or $3.75 a share, a year ago.

Write to Charity L. Scott at Charity.Scott@wsj.com