Apparel e-commerce platform Rent the Runway posted a beat estimated revenue, and Barbara Doran, the CEO and CIO at BD8 Capital, joined Cheddar News to discuss the earnings report along with other topics affecting the market. "This is also a secular growth story because they do occupy a unique niche," she said of Rent the Runway. "They did identify an important need." Doran was impressed by the company's numbers in terms of subscription growth.

Closing Bell

Rent the Runway Beats on Earnings as It Blows Away Subscription Growth Numbers

But let's turn back to the major indexes for now, a day of gains ending near session highs for the major indexes still down on the year, still a cloudy picture. But I do want to bring in our markets Guest Barbara, Duran Ceo and chief investment officer of BD eight Capital Partners Barbara. It's good to see you what is your reaction to the market today despite a record high print on producer prices. Well that that is very interesting because it was not only the P. P. I. Today which is a record and double digit, but the day before the C. P. I. Number was not any small thing either. But I think the market is telling us today to a couple things to note one. The breadth was amazing. It was across pretty much every sector And the volume in terms of volume was about 80% to the upside. The vix has calmed down as we all know, that's a measure of the volatility, tells you something about the risk on risk off appetite. So today was very constructive and in fact the last few days if you look at the typical stock it actually they did better than the indexes show. So I think the market is telling us some very important things inflation, we're very aware of it somewhere in here is peak inflation, whether it's this month or next month, but you're already starting to see signs, you know, with freight pricing a little softer used cars, which I think we're all aware of in terms of what's happened there last year. Used car prices were up some 40 to 43% year every year but the first quarter they are softening so there's all sorts of little signs that things are maybe peaking and certainly in the C. P. I. Number the day before when you look at core it came in lower than expected. Which is you know, not reason to celebrate yet but it's reason reason to think maybe you know, some good things are happening. So I think the market is really discounting um peak inflation here, interesting barbara can inflation come down as the Fed raises rates in a scenario that we avoid a recession. I think that's a big concern for investors and many americans right now will this economy go into a recession with still some unresolved headwinds, notably the war in eastern europe. Yeah. Kristen you're so right. The Ukraine is a big wild card. You know, we know it's going to have an impact and is having an impact on energy prices, you know, on food prices because of the breadbasket, the wheat that they produce and other things like that. But I think that um Inflation is certainly is should be is a factor but will be I think somewhat controlled and I think it's going to stay higher I mean, but nobody expected it, you know, maybe some people do, but nobody expected to stay this high this long so it's not going to go back to 2% anytime soon. But just remember we are at almost full employment. The unemployment rate is down to 3.6%. It was 3.5 pre covid wages are going up, consumers got their balance sheets, uh, their balance sheets in shape. And also that was what was interesting with Jamie Dimon's comments this morning on Jpmorgan. Yes, their profits were down big, but they had, that was very much business specific to them in terms of lack of I. P. O. S. Financing fees For investment banking, all that. But when he talked about, he said, look, the economy is strong and we are seeing it in the consumer numbers, credit card spending is up 29%. And what's interesting too is travel and leisure spending up 64%. That's what you saw reflected in delta this morning, where they talked about explosive demand. When you and Ken talked about it earlier. Here's another question for you, Barbara, I just, I do want to ask these banks right. I mean, I think the banks are a good indicator as to whether or not we could be headed Toward a recession and profits down some 42% for Jpmorgan I think that is a bit of an eyesore after investors have been funneling money into these banks certainly toward the end of last year, our banks of sector as the chief investment officer that you'd stay away from or is the dip perhaps a buying opportunity here. Yeah, Christian, that's a great question because people are looking at Jpmorgan for instance, it's down 16, year to date. It normally sells it more than two times book because it is a premier bank but it's now 1.5. But the fact is they're not immune, you know, to the business market forces within their business. So I think if you're going to, if you want to be in the banks and there's a lot of strategists out there saying you should have financial waiting. You really want to go to the much more interest sensitive because that was a really strong area for them. You know the net interest margins, the net interest income. And so banks like Wells Fargo or Bank America some of the regional banks who have much more interest rate sensitivity will do much better because they can make a lot of money on the spread the money they borrow to loan out to customers. So yeah, I think you have to be much more selective at this point. And Jpmorgan I think I'd wait a bit. Yeah. Yeah. Clearly based on those comments that we got from Jamie Diamond with that uncertainty that he noted there Barbara, I want you to stick with us. We do have some breaking news rent the runway out with its earnings report after hours since the market's closed And that stopped getting 4% on the session after rising at nearly 7% during the actual trading day. So the after hours gain is a gain of about 4%. After a better than expected report, the company lost 62 cents a share in this latest quarter, but that was better than the 70 cent loss that Wall Street expected. We do see that revenue beat as well, 61 64.1 million. The revenue estimate was 63 .2 million. And the company providing positive guidance full year revenue guidance that certainly exceeds Wall Street's expectation rent the runway expecting full year revenue of anywhere between 295 million to 305 million. And Wall Street's estimate was just 202.5 million. So clearly outperforming on a full year basis. The company also providing Current quarter guidance expecting revenue between 63.5 million to 64.5 million. And that basically sandwiches the Wall Street expectation of 64.3 million. So, Active subscribers did rise 110% from the same time a year ago coming off extremely low comparables Ending the quarter with active subscribers of 115,240. So generally a pretty strong report here and that stocks are continuing to rise in the after hours Barbara, I hope you're still with us. I'd love to get your take on this of course, an economic story. A reopened story as well. What's your reaction to rent the runway's results. Yeah, christian. You're exactly right. And but it's also a secular growth story because they do occupy a unique niche. They did identify an important need is you just said yourself and I like that idea. You didn't get a different dress for every different appearance. You know, the key thing because they really had a great quarter right after their I. P. O. They just I P. O. As we know in october And the last quarter, subscription growth was strong. Revenue growth was strong. So we really wanted to see if that trend was continuing and they really blew away the numbers in terms of subscription growth. I think you said 110% the revenue and earnings were stronger than the street expected. So, and I want to hear more, you know, and they do their conference call in terms of the guidance. But because the The challenge for this company is that most analysts out there think they will not make money until 2025. So it's really can they accelerate that can they cut their costs? And so that's and they have a lot of initiatives in that regard. And it's interesting that you said about, you know, they were killed in cold because who could go out. But their mix has changed interestingly enough, it's now about 25% evening where 25% business wear and 50% casual, which is really a reflection of differing uh, you know trends here. You know, post Covid or well you can wish we could say post Covid. So it's interesting. So it's worth keeping an eye on but it's small and uh we'll have to see when they make money. I'm curious to from an economic and affordability standpoint when it comes to renting clothes. If it does seem more economical, more affordable in the current environment. Knowing that inflation is rising, what's your take? Well, it's interesting because they have three different subscription packages. Um and I think for the real person who has to have clothes every day they'll pay that 200 plus a month. But what's interesting is that when you look at their stats like 25% of their um lower-based subscribers who are upping it and doing one more piece of month. So I think right now people are flushed with cash, their savings are being spent down but they're making more money and they're feeling they want to be out there. And so I I think there's good support, you know, right here, both economically and culturally for this uh for this company. And I got to tell you as someone who's been perusing the site recently, not just clothes but also accessories and some very nice handbags that are alluring to the, I just had to make that note. Absolutely. Barbara Durant Ceo Investment Officer of B. D. A. Capital Partners. Barbara, thank you