When Retail Startups Get Valued Like Tech Companies, Trouble Follows

Rent The Runway, the designer women’s fashion rental service, is private and doesn’t publish earnings but it would be surprising if it was profitable. It is valued at a cool $1 billion. Stitch Fix, the online personal styling service, makes money but its earnings are erratic. It is valued at $2 billion, over 50 times EBITDA (earnings before interest, taxes, depreciation and amortization). Farfetch, the luxury fashion boutique marketplace, has never made a profit and every year it loses more money than the year before. It is valued at nearly $4 billion. How do these new fashion companies convince investors to buy in at these values? I recently heard Anushka Salinas, the chief operating officer of Rent The Runway, describe the company as a “data and logistics company.” That’s Wall Street-speak for: we’re worth a lot of money. Salinas was incredibly articulate and impressive. I left thinking, wow, what a great speaker and what a great company. Read more at Forbes.