Rent the Runway (RENT) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01If we are unable to drive future growth or manage our growth effectively, our brand, Company culture, and financial performance may suffer
2. 02We compete with other fashion rental companies and also with a range of traditional and online retail and resale fashion companies and we expect competition to continue to increase in the future. To be successful, we need to continue to attract and retain customers and brand partners
3. 03We rely on consumer discretionary spending and have been, and may in the future be, adversely affected by economic downturns and other macroeconomic conditions or trends
4. 04A high proportion of our revenue comes from longer-tenured subscribers. A decrease in the number of customers, their tenures with us, and/or a reduction in the amount customers spend on our offerings could negatively affect our operating results
5. 05We have a history of losses, and we may be unable to achieve or sustain profitability
6. 06If we fail to anticipate and respond successfully to new and changing fashion trends and consumer preferences and accurately forecast consumer demand, our business could be harmed
7. 07Shipping and logistics are a critical part of our business and our supply chain and any changes or interruptions in shipping or logistics operations could adversely affect our operating results
8. 08If we are unable to acquire and manage our products effectively and plan for future expenses, our operating results could be adversely affected
9. 09If we fail to maintain and enhance our brand, our ability to attract and retain customers will be impaired and our business, financial condition, and results of operations may suffer
10. 10If we are not able to continue to improve our website and mobile app performance, keep pace with technological changes, enhance our current offerings, and develop new offerings in a timely way to respond to the changing needs of partners and customers, our business, financial performance, and growth may be harmed
11. 11Our partners and customers may not be satisfied with our technological or other platform enhancements or new offerings or may perceive that these offerings do not respond to their needs or create value for them. Our customers may also be dissatisfied with the product mix we currently offer or will offer in the future
12. 12We rely heavily on the effective operation of our proprietary technology systems and software, as well as those of our third-party vendors and service providers, for our business to effectively operate and to safeguard confidential information
13. 13Any significant technology disruption or failure, cyberattack or data security incident could adversely affect our business, financial condition and operations
14. 14Our e-commerce business faces distinct risks, such as fulfillment of orders, and our failure to successfully manage these risks could have a negative impact on our profitability
15. 15Our quarterly and annual results of operations may fluctuate, which may make it difficult to predict our future performance
16. 16We face risks arising from the restructuring of our operations, which could adversely affect our financial condition, results of operations, cash flows, or business reputation
17. 17Scrutiny and evolving expectations from consumers, investors, regulators, policymakers, employees and other stakeholders regarding environmental, social and governance matters may adversely impact our business and reputation
18. 18We rely on the experience and expertise of our Co-Founder and Chief Executive Officer, senior management team, key technical and strategic employees and hourly personnel
19. 19We believe that our Company culture has contributed to our success and if we cannot maintain this culture as we grow, our business could be harmed
20. 20Material changes in the pricing practices of our brand and manufacturing partners and/or the costs of raw materials could negatively impact our profitability
21. 21Our business is affected by seasonality
22. 22We may require additional capital to support the growth of our business and satisfy our debt obligations, and this capital might not be available on acceptable terms, if at all
23. 23Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs
24. 24Our 2025 Amended Facility contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our business, financial condition and results of operations
25. 25We did not design and maintain effective controls to ensure (i) the appropriate segregation of duties in the operation of manual controls and (ii) journal entries were reviewed at the appropriate level of precision
26. 26The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members
27. 27Strategic investments, partnerships, alliances, or acquisitions could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition, and results of operations
28. 28We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our Class A common stock less attractive to investors
29. 29The COVID-19 pandemic had a material adverse impact on our business. Other future pandemics or public health crises may have a similar adverse impact on our business
30. 30Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States
31. 31If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
32. 32The estimates of market opportunity and forecasts of market growth included in our public disclosures may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, or at all
33. 33Expansion of our operations internationally requires management attention and resources, involves additional risks, and may be unsuccessful

Risks Related to Our Legal and Regulatory Environment

1. 34From time to time, we may be subject to claims, legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results
2. 35Failure to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights could harm our brand, devalue our proprietary content, and adversely affect our ability to compete effectively
3. 36We may incur costs to defend against, face liability or be vulnerable to intellectual property infringement, misappropriation, and other claims and allegations brought against us by others, which could result in substantial damages and diversion of management’s efforts and attention
4. 37Our use of third-party open-source software could adversely affect our ability to offer our products and offerings and subjects us to possible litigation
5. 38We could incur significant liabilities related to, and significant costs in complying with, environmental, health and safety laws and regulations
6. 39Our ability to utilize our net operating loss carryforwards and certain other tax attributes to offset taxable income or taxes may be limited
7. 40Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations

Risks Related to Our Dependence on Third Parties

1. 41We face risks associated with brand and manufacturing partners from whom our products are sourced or co-manufactured
2. 42We rely on third parties to provide the payment processing infrastructure underlying our business. If these third-party providers become unavailable or unavailable on favorable terms, our business could be adversely affected
3. 43Our business relies on third-party cloud infrastructures, and any disruption of, or interference with, our use of cloud infrastructures could adversely affect our business, financial condition or results of operations
4. 44Any failure by us, our brand partners, third-party manufacturers, or marketing partners to comply with our vendor code of conduct, product safety, labor, or other laws, or to provide safe factory conditions for their workers, may damage our reputation and brand, and harm our business
5. 45We may incur significant losses from fraud
6. 46If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business

Risks Related to Ownership of Our Class A Common Stock

1. 47We are required to meet the continued listing requirements of the Nasdaq Global Market and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum share price and certain other corporate governance requirements
2. 48Our share price may be volatile, and our investors may be unable to sell shares at or above the price they paid for them
3. 49Our management has broad discretion in the use of our cash resources and may not use them effectively
4. 50Our business and financial performance may differ from any projections that we disclose or any information that may be attributed to us by third parties
5. 51Future sales of our common stock in the public market could cause our share price to fall
6. 52Certain provisions in our corporate charter documents and under Delaware law may prevent or hinder attempts by our stockholders to change our management or to acquire a controlling interest in us, and the trading price of our Class A common stock may be lower as a result
7. 53Our Amended Charter provides that the doctrine of “corporate opportunity” does not apply with respect to any directors (or their affiliates) who are not our employees
8. 54The effects of climate change and related regulatory, customer and investor responses may adversely impact our business