In a recent Walls Fargo note, it was revealed that Nuuly, an apparel rental company owned by Urban Outfitters, has quickly become an industry leader with over twice the active subscribers as its closest competitor, Rent the Runway. The company has captured both existing and new customers, with most of its under 30 customers this year being new to rental. Nuuly also maintains one of the highest retention rates in the industry, with a 90% retention rate in year one and around a 40% retention rate in years three to five.
One of Nuuly's most important competitive advantages is its ability to obtain inventory at cost from its sister companies, including Urban Outfitters, Anthropologie, and Free People. These products make up around 45% of its current inventory, according to Wells Fargo analysts. In Urban Outfitters' latest earnings, Nuuly's net sales were $124.4 million, an almost 60% increase year over year. The company saw a 53% increase in average active subscribers, which contributed to a 60% increase in brand revenue and added almost 400 basis points of revenue growth to Urban Outfitters' top line.
Nuuly's success has fortified the confidence of Urban Outfitters' COO Frank Conforti, who stated on a first quarter 2026 earnings call with analysts that "the performance at Nuuly over the past year has fortified our confidence that our business model is strong, and the rental market opportunity is very large." Conforti also expressed excitement about Nuuly's potential for significant growth and healthy double-digit revenue and profit growth in the second quarter.
Nuuly's President Dave Hayne has set a high sales goal for the company, aiming to reach $500 million in sales this year. This milestone is considered an achievable goal by Hayne. To support this growth, Urban Outfitters recently expanded the brand's fulfillment capacity by opening a 600,000-square-foot fulfillment center for Nuuly in Raymore, Missouri. The facility includes full laundering and clothing alteration capabilities and was expected to provide Nuuly with the capacity to triple its active subscriber base.
In comparison, Rent the Runway recently reported a 7.2% year-over-year decrease in revenue to $69.6 million and a 2% dip in average active subscribers from the year-ago quarter to 135,896. Nuuly was launched in 2019 and offers 25,000 styles from over 500 brands and currently has around 380,000 subscribers.
Overall, Nuuly's rise as a leading apparel rental company is a testament to its strong business model and the growing demand for rental services in the industry. With continued expansion and innovation, Nuuly is poised to continue its impressive growth trajectory.
