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Quarter 3 earnings reveal that Urban Outfitters' Nuuly rental service generates profit, undeniably signifying positive growth for the business.
Hey there! Let's talk about the recent sales figures at Urban Outfitters' rental and resale business, Nuuly. This badass enterprise helped push Urban Outfitters' Q3 sales up a solid 9% year over year to a cool $1.28 billion. And guess what? Nuuly's own sales soared an impressive 86% or $30 million thanks to a 68% increase in subscribers compared to last year, according to the company's earnings presentation.
The rental unit's gross profit more than doubled year over year to $17 million, and gross margin expanded a whopping 322 basis points to 25.5%, mainly due to an increase in the monthly subscription fee. Operating income even hit $300,000 from a $3 million loss a year ago.
While this growth is phenomenal, it's not all sunshine and roses. There were higher logistics expenses, including costs for a second Nuuly fulfillment center anticipated to open early next year.
Nuuly stormed the scene in 2019 as a subscription rental business. It added a resale option in 2021. And by golly, it's been defying the odds! Online-only apparel resale operations have typically struggled to turn a profit, but Nuuly's been bucking that trend. In fact, other apparel rental companies like Rent the Runway are still playing catch-up.
Nuuly seems to be carving out its own niche, with about 60% of new subscribers reportedly having no previous rental experience. Dave Hayne, who's the CTO and president of Nuuly, says they're not even looking to steal market share from their competitors. He believes they're growing a new market and that rental is a new concept that people have to learn.
Hayne credits Nuuly's partnerships with other brands in Urban Outfitters' stable as key advantages. In November, the unit reached its goal of having 200,000 subscribers, he said.
Jeffries analysts highlighted Nuuly's strength as a major highlight of the quarter. Overall in the period, total company net sales rose 9% to $1.28 billion, with retail segment net sales jumping 7.3%, and retail comps up 5.6%. E-commerce grew in the high single digits, and store sales grew in the mid single digits, according to a company press release. Wholesale took a dive of 3.6%.
By brand, retail comps skyrocketed 22.5% at Free People and 13.2% at Anthropologie, while they dropped 14.2% at Urban Outfitters.
All in all, Nuuly's boom isn't just a nice feather in Urban Outfitters' cap. It represents an innovative strategy in the fashion world, tapping into consumers' desires for sustainable and flexible fashion solutions. Keep an eye on this one, folks!
- Despite the impressive 86% increase in sales for Nuuly, the rental unit experienced higher logistics expenses due to the opening of a second fulfillment center.
- In contrast to the struggles of online-only apparel resale operations to turn a profit, Nuuly has been bucking the trend and defying the odds.
- The growth of Nuuly seems to be carving out its own niche, with about 60% of new subscribers reportedly having no previous rental experience.
- In the Q3 sales figures, Nuuly's own sales soared an impressive 86%, contributing to Urban Outfitters' overall sales of $1.28 billion.
- The partnerships between Nuuly and other brands within Urban Outfitters' stable are said to be key advantages of the subscription rental service.
