By Jennifer Williams
Urban Outfitters' clothing-rental service Nuuly surpassed its sales target last year and is helping boost the retailer's overall growth by driving shoppers to its other brands.
Nuuly's annual net sales surpassed $568 million for the year ended Jan. 31, exceeding a $500 million target executives set last February. Nuuly expanded its base of average active monthly subscribers to 420,000, up roughly 40% from a year earlier. And profit of $35 million increased more than $21 million year-over-year.
Nuuly accounts for around 10% of Urban Outfitters' overall revenue and is driving shoppers to the company's other brands, which include its namesake label as well as Free People and Anthropologie, according to executives. Nuuly's growth is notable for the apparel-rental market, where some companies have grappled with high costs even as popularity for the services has grown.
Nuuly has a couple of advantages over other rental options. It buys about half of its apparel at cost from the Urban Outfitters brand, Anthropologie and Free People operations, saving money compared with buying inventory wholesale. The rest of the roughly 26,000 items are purchased wholesale from brands such as Madewell, Levi Strauss and Reformation. Nuuly also benefits from a built-in shopper base from its sister brands along with the expertise and investment potential of Urban Outfitters.
"It's kind of moved on from being a startup at this point," Dave Hayne, chief technology officer and president of Nuuly, said of Urban Outfitters' rental service. "The half a billion dollar threshold that we've just crossed is kind of emblematic of that now being a real contribution to [Urban Outfitters]."
The target now for Nuuly is $1 billion, though executives haven't set a timeline for hitting it.
Urban Outfitters' net sales for the year ended in January rose over 11% compared with a year earlier to $6.17 billion, with Nuuly adding around 3 percentage points to the increase, executives said. Profit increased roughly 15.5% to $465 million.
Nuuly, launched in 2019, works like this: Subscribers rent a selection of six items for $98 a month, which includes free shipping, returns and professional cleaning. They can add up to four more items to a box at an additional cost and there is also an option to buy rented items at a discount. Users are women who tend to be between the ages of 25 and 35. Along with using the service for occasions such as weddings and vacations, users also update their daily wardrobes without the cost and commitment of making a purchase, executives say.
Subscribers can't get enough, with revenue and average active monthly users growing double digits for at least the last eight quarters. And Nuuly's revenue growth significantly outpaces that of Urban Outfitters' other brands, with net sales up nearly 43% and roughly 50% for the three and 12 months ended in January, respectively, compared with the year-earlier periods. The next-highest quarterly figure is for the Urban Outfitters brand, with net sales growth of nearly 12.5%. Free People's annual revenue gain was 10.8%.
"Growth like this can't continue forever," Hayne said. "But I do think the model in general has a lot of tailwinds."
Rental services offer budget-friendly alternatives to buying tops, pants and more. It is viewed as a more sustainable way to shop and allows users to experiment with new brands and styles.
Demand for clothing rental has rebounded in recent years after shoppers, who were stuck at home during the Covid-19 pandemic, gave priority to casual outfits over officewear and formal attire. U.S. consumers spent around $1 billion last year on online clothing rental, up from roughly $500 million in 2020, according to market research firm Future Market Insights. The firm projects U.S. consumers will spend around $1.1 billion this year.
But renting out clothes isn't cheap for companies. It requires predicting trends, washing garments based on specific needs, repairing some of them and, unlike most e-commerce companies, covering the costs to ship items both to customers and then back to warehouses.
Rent the Runway, which has subscription offerings ranging from roughly $110 to $375 a month, has struggled to attract shoppers in recent years. That has started to turn around, executives say, with revenue for the three months ended Oct. 31, at $87.6 million, up over 15% from a year earlier. Its customer base is expanding too -- Rent the Runway had around 147,600 average active subscribers as of the end of October, up nearly 13% from a year earlier -- but it's not at the level Nuuly has seen.
The connection to Urban Outfitters' familiar brands helps attract customers to the rental platform. And vice versa: Nuuly drives shoppers to the sister labels, said Frank Conforti, Urban Outfitters' co-president and chief operating officer. Leading up to Nuuly's launch, company leadership considered the potential that a rental business would cut into shoppers' spending on tops, dresses and more from the other brands.
That hasn't been the case, according to Conforti.
"We thought it was possible that it could pull from some of that average spend from the retail segment brands," he said. "We've actually found the exact opposite, that it actually has been, you know, accretive to those brands."
Write to Jennifer Williams at jennifer.williams@wsj.com
(END) Dow Jones Newswires
February 25, 2026 16:15 ET (21:15 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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