Urban Outfitters Inc.’s second-quarter revenue reached a record high of $1.7 billion, a 10.4% increase compared to the previous year, with Nuuly, its rental service, playing a significant role in this growth. Nuuly itself reported net sales of $179 million, buoyed by a 30.4% rise in its average active subscriber count, hitting a high of over 500,000 in early June before adjusting for seasonal patterns.
A Surge in Rentals
The success of the Nuuly clothing rental service was pivotal for Urban Outfitters’ robust performance in the first half of the year, contributing to a 10.9% increase in total company net sales, which totalled $3.14 billion. Nuuly’s rental subscription sales alone jumped by 31.4%, highlighting its importance in the company’s growth narrative.
A significant part of Nuuly’s inventory success story is tied to Urban Outfitters, Anthropologie, and Free People products, which comprised 45% of its offerings as analysed by Wells Fargo. Dave Hayne, Nuuly’s President, emphasised the value of their sister brands in enriching the platform’s assortment whilst also diversifying with new brands like Collina Strada, Faithfull, and Edikted. Additionally, collaborations with Simon Miller and Tyler McGillivary, and the integration of Revolve’s private label further expanded their brand selection by 35%, resulting in nearly 33,000 choices.
Expansion and Innovations
To cater to an expanding subscriber base and broad inventory, Nuuly is taking measures to enhance customer experience through a personalised recommendation system similar to that of streaming giants like Netflix and Disney+. The company has also implemented a custom fit guidance engine to refine the checkout process, whilst focusing on delivery improvements. A fall 2026 campaign targeting Generation Z underlines their engagement strategy.
Investment in infrastructure is also part of Nuuly’s forward movement, with automation in garment storage and sorting planned over the next year, alongside expanding its East Coast capabilities from 300,000 to 1 million square feet near Philadelphia. As Hayne noted, these developments would better support around 1.2 million subscribers with improved operational efficiency.
Challenges and Competition
In the competitive landscape, Rent the Runway, a chief rival, reported 155,692 active subscribers in its Q1 2026 results and announced plans to introduce more than 30 new brands this year. Such moves are indicative of the fierce competition faced by Nuuly as it continues to capture market share.
Looking towards the third quarter and fiscal 2027, Urban Outfitters Inc.’s CFO Melanie Marein-Efron projected high single-digit company sales growth and mid-single-digit retail segment increases. The company’s wholesale segment could see growth in the low teens, while Nuuly is expected to sustain a trajectory of high 20s revenue growth as subscriber momentum remains strong. Overall, the company anticipates maintaining a high single-digit sales growth throughout fiscal 2027.
Reporting based on coverage first published by retaildive.com.