Nuuly, Urban Outfitters’ clothing rental platform, reported another quarter of impressive growth Wednesday, reaching a milestone that has eluded many of its competitors: profitability.
Parent company URBN, which also holds Anthropologie, Free People and Urban Outfitters under its belt, reported net sales in its rental business jumped 56 percent for the quarter ending Jan. 31 to $113 million. Nuuly also saw its operating income increase to $5.2 million for the quarter, reversing a $1 million loss in the same period last year. Sales for the full fiscal year rose 60 percent, to $378 million, with operating income reaching $13.3 million.
Nuuly, which launched in 2019, is one of many rental services created by established fashion retailers around that time. They were responding to a surge in consumer interest in the concept, which was fuelling the rapid rise of Rent the Runway and other start-ups promising an “endless closet.”
Unlike most brands, which hired third parties to operate their rental platforms, Nuuly was built in-house by URBN, which invested over $100 million in the platform. A focus on everyday dressing, rather than the occasion-wear and designer fashion that made up the core of Rent the Runway and similar services, helped Nuuly find an audience. Almost 50 percent of Nuuly’s inventory comes from URBN brands.
So did its parent’s deep pockets, which paid for marketing, inventory and a logistics network – it operates two distribution centres, one in Philadelphia and a second in Missouri which opened last year – that rivals struggled to match. Nuuly now has over 300,000 active subscribers, compared to Rent the Runway’s roughly 130,000 subscribers.
“The rental apparel business is a business model where profit is achievable, but it comes with scale,” said Dave Hayne, Nuuly’s president. “It really came down to our leadership team across URBN having the resolve to stick with the model through Covid and through some ups and downs, and feeling confident in the long-term prospects of the business.”
Operating on a bigger scale has allowed the business to address pain points common to the rental market, such as slow shipping, limited inventory levels, poorly laundered clothing and quality concerns. Nuuly is able to retain 50 percent of its active subscribers after 12 months, and 40 percent after 24 months.
“We are really building a market here,” said Hayne. “We feel pretty good about our retention rates and the ability for us to keep subscribers interested.”
The service is also driving business at URBN’s other brands, according to Hayne, who says Nuuly allows subscribers to trial their brands before making a purchase.
Nuuly’s rivals are still in the game. Castle, a leading white label rental service, continues to power rental at brands including Vince, Maje and, starting last fall, Altuzarra. Rent the Runway now bills itself as “a clothing rental subscription for every day” while continuing to specialise in contemporary labels. Vivrelle’s pitch is as a go-to for accessories like vintage Louis Vuitton handbags.
Moving forward, Nuuly isn’t planning on shaking up the strategy that’s made them successful.
The company will continue to court younger consumers by inking deals with upscale labels such as Barbour and Polo Ralph Lauren, and creating product collaborations with buzzy favourites such as Farm Rio, Anna Sui and Rachel Antonoff. Nuuly, in 2025, also plans to update its search function to include AI-driven product recommendations to allow their customers to better discover their offering.
Editor’s Note: A previous version of this story stated that Nuuly’s sales grew by 78 percent to $112 million in the fourth quarter. This is incorrect. Nuuly’s sales grew by 58 percent to $113 million.
