Can fashion rental’s recovery carry Rent the Runway to a successful IPO?

Rent the Runway filed for an IPO this week, making it the first fashion rental company to go public.

The exact details of the IPO were not revealed, as the company did not disclose any information beyond its press  announcement on Monday.

The move comes at an interesting time for Rent the Runway. Pre-pandemic, the company was riding high. It was valued at over $1 billion in 2019 and had a solid hold on the fashion rental market. But the company lost some of its valuation, dropping down to  $750 million in May due to the pandemic. Many event use cases for Rent the Runway were canceled due to Covid-19.

But Rent the Runway executives told Glossy in April that they expect a massive recovery through the summer and fall, fueled by increased vaccinations and the public going back to offices and events. Rent the Runway has already seen some of that comeback in the last few months, with dress rentals increasing every week from January to April.

The return of weddings has played a big part in that. Nearly 50% of weddings planned for 2020 will happen this year, according to The Knot. In April, Rent the Runway svp of brand and customer strategy Angie Hellman told Glossy that the company would be ramping up marketing to match the recovery of the business.

“Throughout this spring and summer, we’re increasing our marketing spend in tandem with the uptick in optimism and sense of possibility we’re seeing from consumers as the pandemic dwindles,” Hellman said “We’re working on an upcoming brand campaign where we’ll be exploring new paid channels. Word-of-mouth has always been a top acquisition driver for Rent the Runway, so we’re also investing in some exciting developments for our ambassador and referral programs.”

Rent the Runway has experienced growing pains since its founding in 2009. It opened its first of five stores in 2014, before announcing in August 2020 that it would close all locations. It launched its popular Unlimited business model in 2016, but axed it in September of 2020, during the pandemic. In 2019, it expanded to the kids’ and home decor categories — the latter, through a partnership with West Elm. It’s also expanded its core women’s apparel offering to categories including activewear. Rent the Runway was valued at more than $500 million in 2016.

Rent the Runway is just one of several fashion companies that has filed for an IPO this year. Authentic Brands Group, which has bought several bankrupt retailers over the last three years, filed on July 7. Luxury fashion house Ermenegildo Zegna followed, announcing its SPAC plans this week. Overall, this summer looks to be among the busiest IPO seasons the New York Stock Exchange has ever seen, according to Bloomberg.

But the crowded market along with the rise of the Covid-19 Delta variant may make it difficult for Rent the Runway to attract the money it wants. The rental market is also more crowded than it was when Rent the Runway launched in 2009. Other players including Armoire, Nova Octo and Urban Outfitters’ Nuuly have joined the space in the last two years, along with retailers’ in-house rental services like Banana Republic’s Style Passport.

But Rent the Runway is still a dominant player in the space. Its $750 million valuation outstrips its competitors. The company’s success will serve as a bellwether for the lengths to which rental services can grow as the market matures.

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