NYSE:AKA a.k.a. Brands Q3 2023 Earnings Report $7.26 +0.03 (+0.41%) Closing price 03:58 PM EasternExtended Trading$7.38 +0.12 (+1.58%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast a.k.a. Brands EPS ResultsActual EPS-$0.18Consensus EPS -$0.12Beat/MissMissed by -$0.06One Year Ago EPSN/Aa.k.a. Brands Revenue ResultsActual Revenue$140.83 millionExpected Revenue$140.65 millionBeat/MissBeat by +$180.00 thousandYoY Revenue GrowthN/Aa.k.a. Brands Announcement DetailsQuarterQ3 2023Date11/8/2023TimeN/AConference Call DateWednesday, November 8, 2023Conference Call Time4:30PM ETUpcoming Earningsa.k.a. Brands' Q1 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled on Wednesday, May 7, 2025 at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by a.k.a. Brands Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 8, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:01Greetings, and welcome to the AKA Brands Holding Corp. 3rd Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:24It is now my pleasure to introduce Emily Swartz. Thank you. You may begin. Speaker 100:00:30Good afternoon. Thank you for joining AKA Brands' 3rd quarter 2023 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka brands.com. With me on the call today is Jeron Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Speaker 100:01:02Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to This call will contain non GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I'll turn the call over to Kieran. Speaker 200:01:36Thanks, Emily. Good afternoon, everyone, and thanks for joining our Q3 earnings call. Before I discuss our key priorities and review our results, I want to highlight some important takeaways from the quarter. We delivered growth in the U. S. Speaker 200:01:51Business. Our balance sheet and financial condition is strong. We generated positive operating cash flow in the quarter. We're taking aggressive action to right size our inventory position in Australia and we have been in the market purchasing our shares, which we believe offer tremendous long term value. As laid out last quarter, we've been laser focused on 3 priorities for the back half of the year. Speaker 200:02:16First, chasing demand and building awareness through increased levels of newness and expanding our omni channel initiatives. 2nd, improving our operations by reducing our inventory levels and third, Strengthening our balance sheet by paying down additional debt. I'm pleased to announce that we've made progress against all three priorities and we'll continue to advance these initiatives throughout the remainder of the year. As evidenced by our in line sales performance, we continue to chase customer demand. Fashion newness is resonating well with our customers and we are increasing our total addressable market, particularly in the U. Speaker 200:02:55S. By introducing our brands to new channels and customers, including the opening of our first Princess Polly store in September. We continue to strategically reduce our inventory, which is down $37,000,000 year over year and down 21% since the beginning of the year. And lastly, we paid off an additional $13,000,000 of debt in the 3rd quarter, which brings us to a year to date debt reduction of $37,000,000 I'm very proud of our progress against these initiatives and I want to thank the team for their hard work and commitment to our brands and customers. Net sales for the 2nd quarter were $141,000,000 which was in line with our expectations. Speaker 200:03:41Net sales in the U. S. Increased 2% compared to the Q3 last year and grew nearly 10% on a 2 year basis. I'm proud of the progress we're making in the U. S. Speaker 200:03:52As the region represents a greatest opportunity for growth and brand expansion. In fact, The U. S. Now accounts for 60% of total sales. Despite the growth in the U. Speaker 200:04:03S, our quarter profitability was impacted by continued Consumer macro headwinds in Australia, which led to a lower than expected 3rd quarter adjusted EBITDA of $4,700,000 As I mentioned in my opening comments, we are taking aggressive actions to improve our overall operations in the region, which I will provide more detail on shortly. Importantly, the improvements we have made to our operating model enabled us to generate positive 3rd quarter operating cash flow of $11,000,000 Turning now to a discussion of our omni channel initiatives and our brand highlights. We are pleased with the We're seeing with increasing our brands total addressable market through innovative merchandising and marketing initiatives as well as through our channel expansion initiatives. As of today, all of our brands are now active in at least 3 channels, including direct to consumer, wholesale stores or marketplaces. Princess Polly is once again ranked as a top 10 shopping website for female teens in the U. Speaker 200:05:07S. According to Piper Sandler's Taking stock with team survey that was released last month, further demonstrating the power and popularity of the brand among its core demo. In an effort to accelerate brand awareness, we officially opened the 1st Princess Polly store in early September at the Westfield Mall in Century City, Los Angeles. The store has outperformed our expectations and we're very pleased with the overwhelming positive response from customers. The store is approximately 3,500 square feet that features new styles arriving weekly. Speaker 200:05:44To give you more context on the financials, the current sales run rate for the store is tracking to $5,000,000 in annual sales With a projected 4 wall margin contribution in excess of 20%, paving the way for tremendous opportunity to scale our physical store footprint. Customers were very enthusiastic for the opening weekend with lines forming at 4 in the morning as hundreds of customers waited to experience Princess Polly in real life for the first time. Complete with next generation digital displays, Instagram Moments and personalized product recommendations, The store was strategically designed to engage shoppers while also serving as a hub for content creation. Additionally, bringing to life sense of community and connection that Princess Polly has grown through social media, the store will hold special events such as product launches, meet and greets with influencers and styling workshops. We're excited about their upcoming in store events, which recently kicked off. Speaker 200:06:45Yesterday, the brand hosted a USC versus UCLA block party at the store to drive college student traffic. And next week, the store will host an influencer Friendsgiving event. Importantly, in addition to the profitable in store revenue generation, 30% of in store customers are new to the Princess Polly brand. We're also seeing the halo effect in our e commerce business, While simultaneously gathering key customer shopping behavior insights, which will help us to further expand our reach. The store opening solidifies Princess Polly's unique opportunity to take a strong digital brand physical. Speaker 200:07:24And it's clear that further enhancing Princess Polly's connections with customers through various touch points will create long lasting brand affinity and loyalty. With that end, I'm excited to announce that Princess Polly has hired its 1st Senior Vice President of Retail in the U. S. Sarah Davis, We recently joined from Lululemon, where she was the VP of Retail and was responsible for over 400 stores in the U. S. Speaker 200:07:51Sarah will spearhead Princess Polly store expansion plans, beginning with the addition of 3 to 5 stores in 2024 with upcoming stores in San Diego and Boston. We also remain pleased with the success of Princess Poly's other omni channel initiatives, including wholesale and marketplace expansion. Princess Polly has a great relationship with PacSun, which as a reminder was the brand's 1st wholesale partnership ever. Additionally, Princess Polly is testing wholesale agreements in Mexico and Canada in the upcoming quarters as they look to increase Princess Polly's international footprint. Pedal and Pup, our women's brand targeting customers Age 25 to 34 also continues to test different omni channel growth opportunities and is now live on Macy's Marketplace adding to the brand's marketplace presence at Target. Speaker 200:08:44We're seeing strong assortment acceptance Setting the stage for meaningful growth entering the holiday season and beyond. In addition to enhancing Petal and Puff's brand awareness, Our marketplace presence is enabling us to reach new customers. In fact, 96% of customers who purchase Petal and POPS products On the target, our Macy's marketplace site are new to file customers, which is a powerful omnichannel test proof point. We are further expanding Petal and Pub's reach into 2 wholesale tests launching in the 4th quarter, one with Victoria's Secret's And another with Mexican retailer, Liverpool. As we think about the early success of our omni channel initiatives at our brands, It gives me great confidence that we will increase our total addressable market and that our brands will resonate with new customers across multiple channels and formats. Speaker 200:09:39Turning now to our Streetwear brands. It has officially been 1 year since Country Kings entered the U. S. With the anniversary of its store opening this past weekend. The store surpassed its annual revenue growth and first party brands comprise majority of the revenue this year, Further proving the relevance and demand for the international Stuttgart brand is strong. Speaker 200:10:02As Country Kings continues to grow popularity in the U. S, they're attracting top tier partners in marketing events. We're excited about upcoming events at the store with Formula 1 and the UFC. Beginning next week, in partnership with McLaren Racing and Mitchell and Ness, Culture Kings will debut a week long activation to celebrate the Las Vegas Formula 1 Grand Prix. Exclusive to Culture Kings, the brand will host Immersive elements in store in line with the brand's retail entertainment ethos, including an in store replica of McLaren Racing Car, An appearance by Lando Norris, official McLaren Racing Simulators, Heritage Formula 1 Pieces, And limited edition McLaren, Mitchell and Ness and Colja King's products that we launched last week. Speaker 200:10:53We're equally pleased with the U. S. Digital businesses growth over the past year, with active customer growth over 40% year over year. In addition, Culture Kings is also picking up steam among celebrities, athletes and influencer musicians. Jay Z, Rick Ross and Jay Balvin have all been spotted wearing Culture Kings 1st party brands recently, including Leuter and Kare. Speaker 200:11:19We will remain very bullish on the brand's long term growth potential. Minimal, our other streetwear brand and a dominant player in denim and bottoms for men Age 25 to 34 continues to be a top seller at Contra Kings Las Vegas and is now the top selling first party brand in the store. The brand is highly sought after amongst athletes and celebrities, the top NFL and NBA players purchasing and wearing Minimal before and after games. And Minimal is also exploring omni channel initiatives and its wholesale agreements with approximately 50 regional On the P and L, I want to provide an update on the environment in Australia. As I alluded to earlier, we are facing continued macro pressure across our brands in Australia and New Zealand. Speaker 200:12:15However, we are taking clear and decisive action in the region to set up our brands for a strong 2024. Towards the end of the Q3, we made several changes to the Culture Kings Australia operating model. Under the leadership of Wes Boyette, the Co Founder and Co CEO of Princess Polly, we've appointed Ian Everest as the leader of Culture Kings in Australia. Over the last few years, Ian served as General Manager of Princess Polly Australia and is a seasoned merchandising and marketing professional. Beginning in the Q3, Ian and team began rapidly converting the Culture Kings merchandising model to test and repeat, which allows for speed and flexibility during dynamic consumer cycles. Speaker 200:13:01Ian and team have already started to transform the Culture King supply chain And by the second half of next year, all of Culture Kings 1st party brands will be operating on the test and repeat short lead time merchandising cycle. Additionally, as a result of the increased pressure on the consumer in the region, towards the end of the Q3, we began reducing inventory at Culture Kings, which is reflected in our lower gross margin and profitability for the quarter. We will continue to work through the inventory at Culture Kings Australia through the Q4 and into the Q1 of next year. I'm confident that the transition to a test and repeat merchandising model The reduction of inventory sets Culture Kings up for a strong 2024 in Australia and we're very confident in the brand's long term success. Now I'll give you more detail on the P and L before taking your questions. Speaker 200:13:53For the Q3, net sales were $141,000,000 a decline of 10% compared to the Q3 last year, but a sequential improvement for the Q2. On a constant currency basis, net sales were down 8% compared to last year. As I mentioned, I'm proud that we delivered growth of 2% in the U. S. Compared to the Q3 last year. Speaker 200:14:15The Australia and New Zealand region declined 25% and the rest of the world grew by 5%. Total orders for the quarter were 1,700,000 are down 6% compared to the Q3 last year, which was predominantly impacted by lower demand in Australia and New Zealand region, Orders were down 17%. In the U. S, where we see the largest opportunity to expand our reach, We are pleased to see order growth of 6% driven by higher traffic. We served 3,600,000 active customers in the 3rd quarter. Speaker 200:14:53On a regional basis, active customers in the U. S. Were down 4% And in Australia and New Zealand, active customers were down 14%. Our active customer count is calculated on a 12 month basis. And as Reminder, we pulled back on marketing spend in the Q4 last year, which will impact our active customer growth into the Q2 of 2024. Speaker 200:15:16Average order value of $81 decreased 5% compared to the Q3 last year on a reported basis and was down 2% in constant currency. Gross AOV in local currency was down 8% in Australia and New Zealand region, primarily due to our targeted promotions to clear through inventory. Our 3rd quarter return rate was 18%, which remains one of the lowest among our peers. Moving to profitability. Gross margin in the 3rd quarter The contraction was entirely due to the strategic discounting in Culture Kings Australia as we successfully move through inventory, which positions the brand to increase its product newness over the coming quarters. Speaker 200:16:10The gross margin was also impacted by a higher return rate, partially offset by lower freight expenses. To give you more perspective, the actions we're taking at Culture Kings Australia negatively impacted our gross margins by approximately 105 basis points in the quarter. Excluding the Australia region, gross margins would have increased driven by improved full price selling and benefits from lower airfreight versus last year. Selling expenses declined 12% to $36,000,000 compared to $41,000,000 in the Q3 of 2022. Selling expenses were 26 percent of net sales, down 60 basis points compared to the Q3 of last year. Speaker 200:16:54Driven by operational efficiencies and distribution fulfillment and outbound shipping, I'm pleased to report that we were once again able to leverage selling expenses. Anchored on the operational efficiencies we had, marketing expenses in the 3rd quarter were $18,500,000 compared to 10.6% of net sales in the Q3 of 2023. In the Q3, we continue to ramp up our marketing in correlation with our newness to drive demand and we also experienced lower levels of effectiveness, particularly in the Australia region. We are working hard to improve our marketing effectiveness over the coming quarters. And as we further our omni channel expansion efforts, we anticipate achieving improved levels of effectiveness and a moderation on your marketing rate. Speaker 200:17:52General and administrative expenses declined by 6% to $24,600,000 compared to $26,100,000 in the Q3 of 2022. On a rate basis, G and A expenses were 17.5 net sales compared to 16.8 percent of net sales in the Q3 of 2022. The change in the rate basis was primarily driven by lower sales volume compared to the prior year. As I stated on prior calls, Our expense base is largely fixed and improvements in sales will require nominal incremental G and A expenses, supporting opportunities to leverage this line in the future. Adjusted EBITDA was $4,700,000 compared to $9,200,000 in the same period last year. Speaker 200:18:40Adjusted EBITDA margin for the Q3 of 2023 was 3.3% compared to 5.9% in the same period last year. I want to reiterate that our adjusted EBITDA For the Q3 of 2023, net loss was $70,000,000 or $6.58 per share compared to a net loss of 100,000 or $0.01 per share in the same period last year. I also would like to remind everyone that effective September 29, We implemented a 1 for 12 reverse stock split, which decreased our shares outstanding to approximately 11,000,000 shares. All references to our outstanding common stock, including per share information, have been retrospectively adjusted to reflect The reverse stock split. Turning to the balance sheet. Speaker 200:19:48As I mentioned, I'm very pleased with the progress we've made to strengthen our balance sheet. We've taken clear action over the last several quarters to significantly reduce our debt and meaningfully improve our inventory levels and composition while also We ended the quarter with $21,000,000 in cash and cash equivalents. We reduced our debt by 26 percent or $37,000,000 from the beginning of fiscal year, ending the quarter at 107,000,000 We had total liquidity of approximately $63,000,000 at the end of the Q3. Moving to inventory. I'm proud of the progress our teams across all of our brands have made on inventory levels, which at the end of the quarter totaled $100,000,000 compared to $136,900,000 at the end of Q3 2022. Speaker 200:20:41Total inventory dollars were down 27% And units were down 15% compared to last year. As I mentioned, we can with continued macro pressure in Australia, we are taking aggressive to right size the Culture Cube's inventory in the region. For our other brands, Princess Polly, Petal and Puff and Minimal, We're confident in the overall inventory composition, newness and quality across all regions. We expect to see a continued decrease in inventory dollars and units through the end of the fiscal year. In the 3rd quarter, we generated $8,900,000 of free at $11,000,000 of operating cash, which compared to $12,000,000 in the Q3 of 2022. Speaker 200:21:26For the 1st 9 months of the year, we generated $18,000,000 in operating cash, which compared to an operating cash usage of $11,000,000 in the comparable period of 2022. I'm very pleased that our positive EBITDA coupled with prudent working capital management, enables us to have stable positive operating cash flow profile. In the Q3, we repurchased 106,566 shares for a total cost of approximately $600,000 As of the end of the Q3, we have approximately $1,000,000 remaining in our share repurchase authorization. Finally, I want to touch on the $68,500,000 non cash goodwill impairment charge that you saw in our filings. In the quarter, we updated valuations for our current businesses and macro trends and took an impairment charge to reflect this updated valuation. Speaker 200:22:23We remain encouraged by the performance in the U. S. And we expect the actions we're taking in Australia to position us well for 2024. We will continue to generate cash flow and we expect to pay down between $10,000,000 $15,000,000 more of debt in the 4th quarter to further strengthen our balance sheet and set us up for a strong 2024. In light of the macroeconomic conditions in the Australia region And the actions we're taking to clear through inventory in the region, we now expect to deliver between $550,000,000 $555,000,000 in net sales and between $13,500,000 $15,500,000 in EBITDA for the year. Speaker 200:23:04Lastly, I want to let you know that while Jill is doing really well, She has made the personal decision to step into a strategic advisory role effective immediately. She will remain on AKA's Board of Directors The Board has begun the search for a Chief Executive Officer. Jill is a retail industry veteran and has championed AKA Brands over the past three and a half years. We're immensely grateful for Jill's leadership and her continued commitment to the company she has helped build. Before I take your questions, I want to remind you that our priorities for the remainder of the year are clear. Speaker 200:23:41We continue to reach new customers and expand our total addressable markets through our direct to consumer initiatives and omni channel expansion. We remain diligently focused on finding even more operational efficiencies I am confident that these actions we are taking in the remainder of the year set our brands up for a strong and successful 2024. And we remain committed to driving long term growth and profitability next year and beyond. Now we'll open it up for questions. Operator00:24:48Our first question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question. Speaker 100:25:01I guess just want to click down Speaker 300:25:02a little bit on the Princess Polly store. Obviously, good to hear it's off to a good start. I guess, Is this the start of a broader retail strategy? I know you always have Culture Kings. Do you foresee opening additional doors in either of those concepts? Speaker 300:25:17And then as a follow-up, just wanted to understand a little bit more on Australia. I guess, is this basically the end of kind of restructuring that business? Or do you think if volumes fall further, There may need to be additional expense action. Thank you. Speaker 200:25:31Thanks, Ed. Yes, I think, look, We're really pleased with the opening of the Princess Polly store and really all the omni channel initiatives that we have going Across all four brands are in at least 3 channels at this point. The Princess Polly store is off to a great start And really solid run rate and we expect it to be over 20% from an EBITDA perspective. Look, it's also great to see that 30% of the customers coming into the Coming into the store are new to Princess Polly. And all of that gives us a great feeling to kind of invest And to continue investing in the kind of the long term of that brand. Speaker 200:26:11And we're delighted that a couple of weeks ago, Sarah joined us as Head of Retail for Princess Polly brings her background from Lululemon, where she managed 400 stores in the U. S. And we feel with that, We will expand our retail footprint for Princess Polly. Next year, we're looking to do 3 to 5 doors. We'll update you as we go. Speaker 200:26:35Specifically on Culture Kings, I think we feel really good with Ian and Wes in place there now and Then bringing their expertise from Princess Polly's and the deep understanding of the test and repeat model into Culture Kings. We've seen across the other three brands The benefits from the test and repeat model, and I think it's really core to us being back to growth and that 2% growth we saw in the U. S. In Q3. We're they're already taking actions and making progress. Speaker 200:27:06We feel we've seen more progress as we go through the first half of next year. We kind of expect that it will be the back half of next year before we see the full impact of that. But certainly believe, look, There's still a lot of value in that brand and long term growth in that brand. And we're already seeing that in the U. S. Speaker 300:27:28Great. Thanks so much. Operator00:27:33Our next question comes from the line of Ike Bertrall with Wells Fargo. Please proceed with your question. Speaker 400:27:40Hi, this is Juliana on for Ike. Thank you everyone for the question. A quick one here. I was just wondering if maybe there is any additional commentary on the monthly sequential performance this past quarter And if maybe there's any notes on what we've seen in the current month and expectations for holiday? Thank you. Speaker 200:28:02Thanks, Juliana. Yes, I would just touch on, I think we've seen continued improvements as we've Improve the quality of the inventory across the brands. I think with the test and repeat model at 3 of the brands, we really made progress on those. In January, those three brands got to A situation where their inventory growth was lower than their sales growth and we've seen that continue as we've gone through the year. And so, just really happy to be back at growth in the U. Speaker 200:28:34S. And That 2% growth. I think as we think about Q4, we feel like we've really we've got great quality of inventory. We've got the right product. We feel we're set up for a strong holiday and are just going to lean into and execute against that. Speaker 400:28:53Great. Thank you so much. Operator00:28:58Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Speaker 500:29:04Hi. Good afternoon and best regards to Jill. As you think about the gross margin, Karen, How do you unpack it, the discounting in Culture Kings? How do you think that moves going forward, the high return rates and some of the offsets to that? And then on the adjusted EBITDA side and the guidance that you provided, as you think about this 4th quarter, How promotional do you need to be? Speaker 500:29:32And with 3rd quarter inventory down 21%, how you're thinking about inventory for the balance of the year? Thank you. Speaker 200:29:40Sure. Thanks, Dana. Yes, I think as we head into the Q4, I would say we are Clearly looking at the trends we've seen in the Q3 and really great to be back to growth in the U. S. With that 2% and seeing strength across All of the brands and with all of the omni channel initiatives that we have in place now in the U. Speaker 200:30:04S. And more coming internationally. I think in Australia, kind of expecting the same trends that we've seen. And as I mentioned in my remarks, we invested about 105 This point is gross margin with the actions we took to move through inventory at Culture Kings in Australia in Q3. I think as we head into Q4, we certainly feel that it won't be as promotional as last year with The test and repeat model we have, the inventory of 3 of the brands is just really, really strong. Speaker 200:30:35What we do, we're modeling that we'll be down about 100 basis points versus last year for Q4 this year. And that's really the big driver of the changing guidance for us As we think about Q4, I think really happy in the other areas of the P and L to see that we're leveraging now and selling expenses Down year over year on G and A, certainly up a little bit these days in marketing like others, but I think We continue to lean into the omni channel initiatives that we balance out over time. Speaker 500:31:11Thank you. Operator00:31:15Our next question comes from the line of Ashley Owens with KeyBanc. Please proceed with your question. Speaker 400:31:23Hi, thanks for taking the question. Just overlapping the year opening of Culture Kings In Vegas, is there anything you attribute the strength in the U. S. To it? And then maybe any insights you've identified that you could implement as you look to rework your strategy in Australia? Speaker 400:31:38Thanks. Speaker 200:31:40Yes. Thanks, Ashley. I think Look, I think it's great to see the brands resonating with our customers. I think that's really a testament to having just great Quality on trend product at an accessible price point. And I think that's where we're just we've always leaned in and we're going to continue to lean in. Speaker 200:32:02I think, as we look Across the brands, I think they're all just doing some really great work. You see Princess Polly continues to be in the top 10 for Piper Sandler's team survey. We continue to see NBA, NFL players and more every day wearing minimal products. You've people like Victoria's Secret looking to work with Petal and And then you've got Country Kings. I think what they're doing with McLaren at the moment is just a great example of how differentiated our brands are From a merchandise perspective and also from a marketing perspective. Speaker 200:32:37And I think all of the brands are going to continue to lean into their differentiation. And they're going to do that and it really has a big opportunity for these brands. I think we see that with the growth in the U. S. But also with the Partners that are looking to that we're working with now and that we're looking to work with. Speaker 200:32:57I think we're still a little bit behind from an active customer perspective, It's great that we see that at Marketplace between Target and Macy's, 96% of those customers are new to Petal and Pulp. We see 30%, as I said, of the customers coming into Princess Polly stores are new to Princess Polly. I think There's just there's a lot of opportunities for these brands, and we're going to continue to lean in and execute against it. Speaker 400:33:27Appreciate the color. Thanks. Operator00:33:38We do have a follow-up question from the line of Dana Telsey. Please proceed with your question. There are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. Operator00:33:58You may disconnect your lines at this time And have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Calla.k.a. Brands Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) a.k.a. Brands Earnings HeadlinesWeiss Ratings Reaffirms Sell (D-) Rating for a.k.a. Brands (NYSE:AKA)April 26, 2025 | americanbankingnews.comWest Japan Railway and a.k.a. Brands have been highlighted as Zacks Bull and Bear of the DayApril 24, 2025 | msn.com3..2..1.. AI 2.0 ignition (don’t sleep on this)I just put together an urgent new presentation that you need to see right away. In short: I believe we are mere days away from a critical announcement from a key tech leader… One that will officially ignite “AI 2.0” – and potentially send a whole new class of stocks soaring. May 6, 2025 | Timothy Sykes (Ad)Bear of the Day: a.k.a. Brands Holding Corp. (AKA)April 24, 2025 | msn.coma.k.a. Brands rises 13.8%April 3, 2025 | markets.businessinsider.coma.k.a. Brands rises 7.1%April 2, 2025 | markets.businessinsider.comSee More a.k.a. Brands Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like a.k.a. Brands? Sign up for Earnings360's daily newsletter to receive timely earnings updates on a.k.a. Brands and other key companies, straight to your email. Email Address About a.k.a. Brandsa.k.a. Brands (NYSE:AKA) operates a portfolio of online fashion brands in the United States, Australia, and internationally. The company offers streetwear apparel, dresses, tops, bottoms, shoes, headwear, and accessories through its online stores under the Princess Polly, Petal & Pup, Culture Kings, and mnml brands. It also operates physical stores under the Culture Kings brand. The company was founded in 2018 and is headquartered in San Francisco, California.View a.k.a. 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There are 6 speakers on the call. Operator00:00:01Greetings, and welcome to the AKA Brands Holding Corp. 3rd Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:24It is now my pleasure to introduce Emily Swartz. Thank you. You may begin. Speaker 100:00:30Good afternoon. Thank you for joining AKA Brands' 3rd quarter 2023 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka brands.com. With me on the call today is Jeron Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Speaker 100:01:02Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to This call will contain non GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I'll turn the call over to Kieran. Speaker 200:01:36Thanks, Emily. Good afternoon, everyone, and thanks for joining our Q3 earnings call. Before I discuss our key priorities and review our results, I want to highlight some important takeaways from the quarter. We delivered growth in the U. S. Speaker 200:01:51Business. Our balance sheet and financial condition is strong. We generated positive operating cash flow in the quarter. We're taking aggressive action to right size our inventory position in Australia and we have been in the market purchasing our shares, which we believe offer tremendous long term value. As laid out last quarter, we've been laser focused on 3 priorities for the back half of the year. Speaker 200:02:16First, chasing demand and building awareness through increased levels of newness and expanding our omni channel initiatives. 2nd, improving our operations by reducing our inventory levels and third, Strengthening our balance sheet by paying down additional debt. I'm pleased to announce that we've made progress against all three priorities and we'll continue to advance these initiatives throughout the remainder of the year. As evidenced by our in line sales performance, we continue to chase customer demand. Fashion newness is resonating well with our customers and we are increasing our total addressable market, particularly in the U. Speaker 200:02:55S. By introducing our brands to new channels and customers, including the opening of our first Princess Polly store in September. We continue to strategically reduce our inventory, which is down $37,000,000 year over year and down 21% since the beginning of the year. And lastly, we paid off an additional $13,000,000 of debt in the 3rd quarter, which brings us to a year to date debt reduction of $37,000,000 I'm very proud of our progress against these initiatives and I want to thank the team for their hard work and commitment to our brands and customers. Net sales for the 2nd quarter were $141,000,000 which was in line with our expectations. Speaker 200:03:41Net sales in the U. S. Increased 2% compared to the Q3 last year and grew nearly 10% on a 2 year basis. I'm proud of the progress we're making in the U. S. Speaker 200:03:52As the region represents a greatest opportunity for growth and brand expansion. In fact, The U. S. Now accounts for 60% of total sales. Despite the growth in the U. Speaker 200:04:03S, our quarter profitability was impacted by continued Consumer macro headwinds in Australia, which led to a lower than expected 3rd quarter adjusted EBITDA of $4,700,000 As I mentioned in my opening comments, we are taking aggressive actions to improve our overall operations in the region, which I will provide more detail on shortly. Importantly, the improvements we have made to our operating model enabled us to generate positive 3rd quarter operating cash flow of $11,000,000 Turning now to a discussion of our omni channel initiatives and our brand highlights. We are pleased with the We're seeing with increasing our brands total addressable market through innovative merchandising and marketing initiatives as well as through our channel expansion initiatives. As of today, all of our brands are now active in at least 3 channels, including direct to consumer, wholesale stores or marketplaces. Princess Polly is once again ranked as a top 10 shopping website for female teens in the U. Speaker 200:05:07S. According to Piper Sandler's Taking stock with team survey that was released last month, further demonstrating the power and popularity of the brand among its core demo. In an effort to accelerate brand awareness, we officially opened the 1st Princess Polly store in early September at the Westfield Mall in Century City, Los Angeles. The store has outperformed our expectations and we're very pleased with the overwhelming positive response from customers. The store is approximately 3,500 square feet that features new styles arriving weekly. Speaker 200:05:44To give you more context on the financials, the current sales run rate for the store is tracking to $5,000,000 in annual sales With a projected 4 wall margin contribution in excess of 20%, paving the way for tremendous opportunity to scale our physical store footprint. Customers were very enthusiastic for the opening weekend with lines forming at 4 in the morning as hundreds of customers waited to experience Princess Polly in real life for the first time. Complete with next generation digital displays, Instagram Moments and personalized product recommendations, The store was strategically designed to engage shoppers while also serving as a hub for content creation. Additionally, bringing to life sense of community and connection that Princess Polly has grown through social media, the store will hold special events such as product launches, meet and greets with influencers and styling workshops. We're excited about their upcoming in store events, which recently kicked off. Speaker 200:06:45Yesterday, the brand hosted a USC versus UCLA block party at the store to drive college student traffic. And next week, the store will host an influencer Friendsgiving event. Importantly, in addition to the profitable in store revenue generation, 30% of in store customers are new to the Princess Polly brand. We're also seeing the halo effect in our e commerce business, While simultaneously gathering key customer shopping behavior insights, which will help us to further expand our reach. The store opening solidifies Princess Polly's unique opportunity to take a strong digital brand physical. Speaker 200:07:24And it's clear that further enhancing Princess Polly's connections with customers through various touch points will create long lasting brand affinity and loyalty. With that end, I'm excited to announce that Princess Polly has hired its 1st Senior Vice President of Retail in the U. S. Sarah Davis, We recently joined from Lululemon, where she was the VP of Retail and was responsible for over 400 stores in the U. S. Speaker 200:07:51Sarah will spearhead Princess Polly store expansion plans, beginning with the addition of 3 to 5 stores in 2024 with upcoming stores in San Diego and Boston. We also remain pleased with the success of Princess Poly's other omni channel initiatives, including wholesale and marketplace expansion. Princess Polly has a great relationship with PacSun, which as a reminder was the brand's 1st wholesale partnership ever. Additionally, Princess Polly is testing wholesale agreements in Mexico and Canada in the upcoming quarters as they look to increase Princess Polly's international footprint. Pedal and Pup, our women's brand targeting customers Age 25 to 34 also continues to test different omni channel growth opportunities and is now live on Macy's Marketplace adding to the brand's marketplace presence at Target. Speaker 200:08:44We're seeing strong assortment acceptance Setting the stage for meaningful growth entering the holiday season and beyond. In addition to enhancing Petal and Puff's brand awareness, Our marketplace presence is enabling us to reach new customers. In fact, 96% of customers who purchase Petal and POPS products On the target, our Macy's marketplace site are new to file customers, which is a powerful omnichannel test proof point. We are further expanding Petal and Pub's reach into 2 wholesale tests launching in the 4th quarter, one with Victoria's Secret's And another with Mexican retailer, Liverpool. As we think about the early success of our omni channel initiatives at our brands, It gives me great confidence that we will increase our total addressable market and that our brands will resonate with new customers across multiple channels and formats. Speaker 200:09:39Turning now to our Streetwear brands. It has officially been 1 year since Country Kings entered the U. S. With the anniversary of its store opening this past weekend. The store surpassed its annual revenue growth and first party brands comprise majority of the revenue this year, Further proving the relevance and demand for the international Stuttgart brand is strong. Speaker 200:10:02As Country Kings continues to grow popularity in the U. S, they're attracting top tier partners in marketing events. We're excited about upcoming events at the store with Formula 1 and the UFC. Beginning next week, in partnership with McLaren Racing and Mitchell and Ness, Culture Kings will debut a week long activation to celebrate the Las Vegas Formula 1 Grand Prix. Exclusive to Culture Kings, the brand will host Immersive elements in store in line with the brand's retail entertainment ethos, including an in store replica of McLaren Racing Car, An appearance by Lando Norris, official McLaren Racing Simulators, Heritage Formula 1 Pieces, And limited edition McLaren, Mitchell and Ness and Colja King's products that we launched last week. Speaker 200:10:53We're equally pleased with the U. S. Digital businesses growth over the past year, with active customer growth over 40% year over year. In addition, Culture Kings is also picking up steam among celebrities, athletes and influencer musicians. Jay Z, Rick Ross and Jay Balvin have all been spotted wearing Culture Kings 1st party brands recently, including Leuter and Kare. Speaker 200:11:19We will remain very bullish on the brand's long term growth potential. Minimal, our other streetwear brand and a dominant player in denim and bottoms for men Age 25 to 34 continues to be a top seller at Contra Kings Las Vegas and is now the top selling first party brand in the store. The brand is highly sought after amongst athletes and celebrities, the top NFL and NBA players purchasing and wearing Minimal before and after games. And Minimal is also exploring omni channel initiatives and its wholesale agreements with approximately 50 regional On the P and L, I want to provide an update on the environment in Australia. As I alluded to earlier, we are facing continued macro pressure across our brands in Australia and New Zealand. Speaker 200:12:15However, we are taking clear and decisive action in the region to set up our brands for a strong 2024. Towards the end of the Q3, we made several changes to the Culture Kings Australia operating model. Under the leadership of Wes Boyette, the Co Founder and Co CEO of Princess Polly, we've appointed Ian Everest as the leader of Culture Kings in Australia. Over the last few years, Ian served as General Manager of Princess Polly Australia and is a seasoned merchandising and marketing professional. Beginning in the Q3, Ian and team began rapidly converting the Culture Kings merchandising model to test and repeat, which allows for speed and flexibility during dynamic consumer cycles. Speaker 200:13:01Ian and team have already started to transform the Culture King supply chain And by the second half of next year, all of Culture Kings 1st party brands will be operating on the test and repeat short lead time merchandising cycle. Additionally, as a result of the increased pressure on the consumer in the region, towards the end of the Q3, we began reducing inventory at Culture Kings, which is reflected in our lower gross margin and profitability for the quarter. We will continue to work through the inventory at Culture Kings Australia through the Q4 and into the Q1 of next year. I'm confident that the transition to a test and repeat merchandising model The reduction of inventory sets Culture Kings up for a strong 2024 in Australia and we're very confident in the brand's long term success. Now I'll give you more detail on the P and L before taking your questions. Speaker 200:13:53For the Q3, net sales were $141,000,000 a decline of 10% compared to the Q3 last year, but a sequential improvement for the Q2. On a constant currency basis, net sales were down 8% compared to last year. As I mentioned, I'm proud that we delivered growth of 2% in the U. S. Compared to the Q3 last year. Speaker 200:14:15The Australia and New Zealand region declined 25% and the rest of the world grew by 5%. Total orders for the quarter were 1,700,000 are down 6% compared to the Q3 last year, which was predominantly impacted by lower demand in Australia and New Zealand region, Orders were down 17%. In the U. S, where we see the largest opportunity to expand our reach, We are pleased to see order growth of 6% driven by higher traffic. We served 3,600,000 active customers in the 3rd quarter. Speaker 200:14:53On a regional basis, active customers in the U. S. Were down 4% And in Australia and New Zealand, active customers were down 14%. Our active customer count is calculated on a 12 month basis. And as Reminder, we pulled back on marketing spend in the Q4 last year, which will impact our active customer growth into the Q2 of 2024. Speaker 200:15:16Average order value of $81 decreased 5% compared to the Q3 last year on a reported basis and was down 2% in constant currency. Gross AOV in local currency was down 8% in Australia and New Zealand region, primarily due to our targeted promotions to clear through inventory. Our 3rd quarter return rate was 18%, which remains one of the lowest among our peers. Moving to profitability. Gross margin in the 3rd quarter The contraction was entirely due to the strategic discounting in Culture Kings Australia as we successfully move through inventory, which positions the brand to increase its product newness over the coming quarters. Speaker 200:16:10The gross margin was also impacted by a higher return rate, partially offset by lower freight expenses. To give you more perspective, the actions we're taking at Culture Kings Australia negatively impacted our gross margins by approximately 105 basis points in the quarter. Excluding the Australia region, gross margins would have increased driven by improved full price selling and benefits from lower airfreight versus last year. Selling expenses declined 12% to $36,000,000 compared to $41,000,000 in the Q3 of 2022. Selling expenses were 26 percent of net sales, down 60 basis points compared to the Q3 of last year. Speaker 200:16:54Driven by operational efficiencies and distribution fulfillment and outbound shipping, I'm pleased to report that we were once again able to leverage selling expenses. Anchored on the operational efficiencies we had, marketing expenses in the 3rd quarter were $18,500,000 compared to 10.6% of net sales in the Q3 of 2023. In the Q3, we continue to ramp up our marketing in correlation with our newness to drive demand and we also experienced lower levels of effectiveness, particularly in the Australia region. We are working hard to improve our marketing effectiveness over the coming quarters. And as we further our omni channel expansion efforts, we anticipate achieving improved levels of effectiveness and a moderation on your marketing rate. Speaker 200:17:52General and administrative expenses declined by 6% to $24,600,000 compared to $26,100,000 in the Q3 of 2022. On a rate basis, G and A expenses were 17.5 net sales compared to 16.8 percent of net sales in the Q3 of 2022. The change in the rate basis was primarily driven by lower sales volume compared to the prior year. As I stated on prior calls, Our expense base is largely fixed and improvements in sales will require nominal incremental G and A expenses, supporting opportunities to leverage this line in the future. Adjusted EBITDA was $4,700,000 compared to $9,200,000 in the same period last year. Speaker 200:18:40Adjusted EBITDA margin for the Q3 of 2023 was 3.3% compared to 5.9% in the same period last year. I want to reiterate that our adjusted EBITDA For the Q3 of 2023, net loss was $70,000,000 or $6.58 per share compared to a net loss of 100,000 or $0.01 per share in the same period last year. I also would like to remind everyone that effective September 29, We implemented a 1 for 12 reverse stock split, which decreased our shares outstanding to approximately 11,000,000 shares. All references to our outstanding common stock, including per share information, have been retrospectively adjusted to reflect The reverse stock split. Turning to the balance sheet. Speaker 200:19:48As I mentioned, I'm very pleased with the progress we've made to strengthen our balance sheet. We've taken clear action over the last several quarters to significantly reduce our debt and meaningfully improve our inventory levels and composition while also We ended the quarter with $21,000,000 in cash and cash equivalents. We reduced our debt by 26 percent or $37,000,000 from the beginning of fiscal year, ending the quarter at 107,000,000 We had total liquidity of approximately $63,000,000 at the end of the Q3. Moving to inventory. I'm proud of the progress our teams across all of our brands have made on inventory levels, which at the end of the quarter totaled $100,000,000 compared to $136,900,000 at the end of Q3 2022. Speaker 200:20:41Total inventory dollars were down 27% And units were down 15% compared to last year. As I mentioned, we can with continued macro pressure in Australia, we are taking aggressive to right size the Culture Cube's inventory in the region. For our other brands, Princess Polly, Petal and Puff and Minimal, We're confident in the overall inventory composition, newness and quality across all regions. We expect to see a continued decrease in inventory dollars and units through the end of the fiscal year. In the 3rd quarter, we generated $8,900,000 of free at $11,000,000 of operating cash, which compared to $12,000,000 in the Q3 of 2022. Speaker 200:21:26For the 1st 9 months of the year, we generated $18,000,000 in operating cash, which compared to an operating cash usage of $11,000,000 in the comparable period of 2022. I'm very pleased that our positive EBITDA coupled with prudent working capital management, enables us to have stable positive operating cash flow profile. In the Q3, we repurchased 106,566 shares for a total cost of approximately $600,000 As of the end of the Q3, we have approximately $1,000,000 remaining in our share repurchase authorization. Finally, I want to touch on the $68,500,000 non cash goodwill impairment charge that you saw in our filings. In the quarter, we updated valuations for our current businesses and macro trends and took an impairment charge to reflect this updated valuation. Speaker 200:22:23We remain encouraged by the performance in the U. S. And we expect the actions we're taking in Australia to position us well for 2024. We will continue to generate cash flow and we expect to pay down between $10,000,000 $15,000,000 more of debt in the 4th quarter to further strengthen our balance sheet and set us up for a strong 2024. In light of the macroeconomic conditions in the Australia region And the actions we're taking to clear through inventory in the region, we now expect to deliver between $550,000,000 $555,000,000 in net sales and between $13,500,000 $15,500,000 in EBITDA for the year. Speaker 200:23:04Lastly, I want to let you know that while Jill is doing really well, She has made the personal decision to step into a strategic advisory role effective immediately. She will remain on AKA's Board of Directors The Board has begun the search for a Chief Executive Officer. Jill is a retail industry veteran and has championed AKA Brands over the past three and a half years. We're immensely grateful for Jill's leadership and her continued commitment to the company she has helped build. Before I take your questions, I want to remind you that our priorities for the remainder of the year are clear. Speaker 200:23:41We continue to reach new customers and expand our total addressable markets through our direct to consumer initiatives and omni channel expansion. We remain diligently focused on finding even more operational efficiencies I am confident that these actions we are taking in the remainder of the year set our brands up for a strong and successful 2024. And we remain committed to driving long term growth and profitability next year and beyond. Now we'll open it up for questions. Operator00:24:48Our first question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question. Speaker 100:25:01I guess just want to click down Speaker 300:25:02a little bit on the Princess Polly store. Obviously, good to hear it's off to a good start. I guess, Is this the start of a broader retail strategy? I know you always have Culture Kings. Do you foresee opening additional doors in either of those concepts? Speaker 300:25:17And then as a follow-up, just wanted to understand a little bit more on Australia. I guess, is this basically the end of kind of restructuring that business? Or do you think if volumes fall further, There may need to be additional expense action. Thank you. Speaker 200:25:31Thanks, Ed. Yes, I think, look, We're really pleased with the opening of the Princess Polly store and really all the omni channel initiatives that we have going Across all four brands are in at least 3 channels at this point. The Princess Polly store is off to a great start And really solid run rate and we expect it to be over 20% from an EBITDA perspective. Look, it's also great to see that 30% of the customers coming into the Coming into the store are new to Princess Polly. And all of that gives us a great feeling to kind of invest And to continue investing in the kind of the long term of that brand. Speaker 200:26:11And we're delighted that a couple of weeks ago, Sarah joined us as Head of Retail for Princess Polly brings her background from Lululemon, where she managed 400 stores in the U. S. And we feel with that, We will expand our retail footprint for Princess Polly. Next year, we're looking to do 3 to 5 doors. We'll update you as we go. Speaker 200:26:35Specifically on Culture Kings, I think we feel really good with Ian and Wes in place there now and Then bringing their expertise from Princess Polly's and the deep understanding of the test and repeat model into Culture Kings. We've seen across the other three brands The benefits from the test and repeat model, and I think it's really core to us being back to growth and that 2% growth we saw in the U. S. In Q3. We're they're already taking actions and making progress. Speaker 200:27:06We feel we've seen more progress as we go through the first half of next year. We kind of expect that it will be the back half of next year before we see the full impact of that. But certainly believe, look, There's still a lot of value in that brand and long term growth in that brand. And we're already seeing that in the U. S. Speaker 300:27:28Great. Thanks so much. Operator00:27:33Our next question comes from the line of Ike Bertrall with Wells Fargo. Please proceed with your question. Speaker 400:27:40Hi, this is Juliana on for Ike. Thank you everyone for the question. A quick one here. I was just wondering if maybe there is any additional commentary on the monthly sequential performance this past quarter And if maybe there's any notes on what we've seen in the current month and expectations for holiday? Thank you. Speaker 200:28:02Thanks, Juliana. Yes, I would just touch on, I think we've seen continued improvements as we've Improve the quality of the inventory across the brands. I think with the test and repeat model at 3 of the brands, we really made progress on those. In January, those three brands got to A situation where their inventory growth was lower than their sales growth and we've seen that continue as we've gone through the year. And so, just really happy to be back at growth in the U. Speaker 200:28:34S. And That 2% growth. I think as we think about Q4, we feel like we've really we've got great quality of inventory. We've got the right product. We feel we're set up for a strong holiday and are just going to lean into and execute against that. Speaker 400:28:53Great. Thank you so much. Operator00:28:58Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Speaker 500:29:04Hi. Good afternoon and best regards to Jill. As you think about the gross margin, Karen, How do you unpack it, the discounting in Culture Kings? How do you think that moves going forward, the high return rates and some of the offsets to that? And then on the adjusted EBITDA side and the guidance that you provided, as you think about this 4th quarter, How promotional do you need to be? Speaker 500:29:32And with 3rd quarter inventory down 21%, how you're thinking about inventory for the balance of the year? Thank you. Speaker 200:29:40Sure. Thanks, Dana. Yes, I think as we head into the Q4, I would say we are Clearly looking at the trends we've seen in the Q3 and really great to be back to growth in the U. S. With that 2% and seeing strength across All of the brands and with all of the omni channel initiatives that we have in place now in the U. Speaker 200:30:04S. And more coming internationally. I think in Australia, kind of expecting the same trends that we've seen. And as I mentioned in my remarks, we invested about 105 This point is gross margin with the actions we took to move through inventory at Culture Kings in Australia in Q3. I think as we head into Q4, we certainly feel that it won't be as promotional as last year with The test and repeat model we have, the inventory of 3 of the brands is just really, really strong. Speaker 200:30:35What we do, we're modeling that we'll be down about 100 basis points versus last year for Q4 this year. And that's really the big driver of the changing guidance for us As we think about Q4, I think really happy in the other areas of the P and L to see that we're leveraging now and selling expenses Down year over year on G and A, certainly up a little bit these days in marketing like others, but I think We continue to lean into the omni channel initiatives that we balance out over time. Speaker 500:31:11Thank you. Operator00:31:15Our next question comes from the line of Ashley Owens with KeyBanc. Please proceed with your question. Speaker 400:31:23Hi, thanks for taking the question. Just overlapping the year opening of Culture Kings In Vegas, is there anything you attribute the strength in the U. S. To it? And then maybe any insights you've identified that you could implement as you look to rework your strategy in Australia? Speaker 400:31:38Thanks. Speaker 200:31:40Yes. Thanks, Ashley. I think Look, I think it's great to see the brands resonating with our customers. I think that's really a testament to having just great Quality on trend product at an accessible price point. And I think that's where we're just we've always leaned in and we're going to continue to lean in. Speaker 200:32:02I think, as we look Across the brands, I think they're all just doing some really great work. You see Princess Polly continues to be in the top 10 for Piper Sandler's team survey. We continue to see NBA, NFL players and more every day wearing minimal products. You've people like Victoria's Secret looking to work with Petal and And then you've got Country Kings. I think what they're doing with McLaren at the moment is just a great example of how differentiated our brands are From a merchandise perspective and also from a marketing perspective. Speaker 200:32:37And I think all of the brands are going to continue to lean into their differentiation. And they're going to do that and it really has a big opportunity for these brands. I think we see that with the growth in the U. S. But also with the Partners that are looking to that we're working with now and that we're looking to work with. Speaker 200:32:57I think we're still a little bit behind from an active customer perspective, It's great that we see that at Marketplace between Target and Macy's, 96% of those customers are new to Petal and Pulp. We see 30%, as I said, of the customers coming into Princess Polly stores are new to Princess Polly. I think There's just there's a lot of opportunities for these brands, and we're going to continue to lean in and execute against it. Speaker 400:33:27Appreciate the color. Thanks. Operator00:33:38We do have a follow-up question from the line of Dana Telsey. Please proceed with your question. There are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. Operator00:33:58You may disconnect your lines at this time And have a wonderful day.Read morePowered by