NYSE:AKA a.k.a. Brands Q4 2023 Earnings Report $7.61 +0.14 (+1.87%) As of 02:04 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast a.k.a. Brands EPS ResultsActual EPS-$1.31Consensus EPS -$0.46Beat/MissMissed by -$0.85One Year Ago EPSN/Aa.k.a. Brands Revenue ResultsActual Revenue$148.91 millionExpected Revenue$154.41 millionBeat/MissMissed by -$5.50 millionYoY Revenue GrowthN/Aa.k.a. Brands Announcement DetailsQuarterQ4 2023Date3/7/2024TimeN/AConference Call DateThursday, March 7, 2024Conference Call Time4:15PM ETUpcoming Earningsa.k.a. Brands' Q1 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by a.k.a. Brands Q4 2023 Earnings Call TranscriptProvided by QuartrMarch 7, 2024 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00Greetings, and welcome to the AKA Brands 4th Quarter and Fiscal 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. At this time, I would now like to turn the conference over to your host, Emily Schwartz. Speaker 100:00:25Good afternoon. Thank you for joining AKA Brands' 4th quarter and fiscal 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 is Kieran 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 100:00:57Forward 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 update any such forward looking statements. This call will contain non GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, adjusted gross margin and free cash flow. 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. Speaker 100:01:29With that, I'll turn the call over to Kieran. Speaker 200:01:32Thanks, Emily. Good afternoon, everyone, and thanks for joining our call. 2023 was a transformational year for AKA, and I want to thank our teams for their continued dedication to building next generation fashion brands for the next generation of consumers. As a group, we stepped up to every challenge, created new opportunities, expanded our customer touch points and significantly strengthened our balance sheet. Before I go through the results, I want to share a few highlights from the year. Speaker 200:02:03We delivered U. S. Net sales growth of 1%, inclusive of 12% growth in the 4th quarter. We generated $33,000,000 of operating cash flow. We reduced our year end inventory by 28% compared to last year. Speaker 200:02:19We paid down approximately $50,000,000 of debt, reducing our debt levels by 35%. We opened a Princess Polly store in Los Angeles, propelling the brand into physical retail for the first time. Culture Kings demand continued to accelerate in the U. S. And registered double digit net sales growth for the year. Speaker 200:02:40And lastly, we tested and expanded a number of omni channel initiatives across our brands, including wholesale engagements with PacSun, Victoria's Secret and Liverpool, and marketplace partnerships with Target and Macy's, which exceeded our expectations. Turning now to the Q4. We delivered $149,000,000 of net sales, which was flat to last year. As I mentioned, we were very pleased that the U. S. Speaker 200:03:07Business grew 12% in the 4th quarter, which is a testament to the strength of our offering. As a reminder, our U. S. Region is now our largest market and where we see the greatest potential moving forward. Despite the strength in the U. Speaker 200:03:22S, our total net sales came in slightly below expectations due to the ongoing headwinds in the Australia and New Zealand region. And we delivered $1,300,000 of adjusted EBITDA, which was in line with our expectations. I'm really pleased that we ended the 4th quarter feeling confident with our current inventory composition and levels, which decreased 28% as compared to 2022. And lastly, we paid off an additional $13,000,000 of debt in the 4th quarter, further strengthening our balance sheet. For the full year, we delivered $546,000,000 in net sales. Speaker 200:04:01And despite the challenging macro environment in Australia, we delivered $14,000,000 of adjusted EBITDA for the year. As we look at 2024, we have 3 key strategic priorities driving our strategic framework. 1st, we will continue to deliver innovative next generation retail strategies to attract and retain customers. This includes the evolution of our test and repeat merchandising approach, delivering newness to customers weekly, expanding our product categories, particularly at our women's brands and leveraging technology and differentiated marketing strategies to deepen our direct relationships with our customers. 2nd, as we look to the future of fashion retail, we are confident that winning brands will be wherever their customer is, whether that's online, in experiential stores, or through marketplace and wholesale channels. Speaker 200:04:56We are committed to showing up for our customers wherever they seek inspiration and transact. Based on the success of our omnichannel tests last year, we're excited to scale our omnichannel initiatives in 2024, which I'll take you through shortly. And third, we will continue to streamline our operations to deliver financial benefits across the company. We are focused on rapidly providing gross margin expansion in the back half of the year. And we're committed to finding additional operating efficiencies to drive rate improvements across the P and L. Speaker 200:05:38Now let me share some recent highlights from our brands as well as growth drivers for the year. Starting off with Princess Polly, our largest brand that targets Gen Z and Millennium women with on trend quality fashion. Princess Polly has gained tremendous popularity in the U. S. Over the last few years, primarily as a direct to consumer online brand. Speaker 200:06:01As I mentioned, as we continue to build durable brands for the future, we're committed to staying in front of our customers no matter the channel. Based on direct customer feedback and a shifting retail landscape, we're thrilled that Princess Polly opened its first store in Century City, LA in September 2023. This marked the first time that customers were able to truly interact with Princess Polly in real life and the feedback was resoundingly positive. The store in the Westfield Century City Mall allows the authentic relationships and community that Princess Polly has built over the last decade come to life in person, further strengthening brand affinity and loyalty. The store is also used as a marketing engine for content creation and in store events, including a successful influencer Friendsgiving event in the Q4 and more to come this year. Speaker 200:06:55Based on the success of the first store, Princess Polly will expand its store footprint by 3 to 4 stores in 2024 and I'm excited to announce that we've officially signed leases on a store on Newbury Street in Boston and another store in the Fashion Volley Mall in San Diego, which are both slated to open in the Q3 of the year. I look forward to sharing more details on the store openings and further store expansion plans in the coming quarters. Equally as important as Princess Polly store expansion strategy is their continued focus on innovating, staying ahead of trends and driving next generation retail strategies online. Through the use of data analytics and customer feedback, Princess Polly is launching several new categories in 2024 with sleepwear and loungewear already launched in January and performing ahead of expectations. This month, we also launched an activewear collection and we have plans for additional new categories as the year unfolds. Speaker 200:07:56We're confident that a broader assortment of fashion styles will resonate with their existing customers and attract new customers to the brand. Princess Polly is constantly innovating to enhance our direct connection with customers and reach new customers on every platform. TikTok remains the preferred platform for Princess Polly customers with over 54,000,000 TikTok views reaching over 40,000,000 people worldwide. In 2024, Princess Polly will harness the power of TikTok to both tell their brand story and drive sales. They're fine tuning the strategy, including expanding their TikTok content team and investing in more paid opportunities as well as scaling their TikTok influencer program. Speaker 200:08:41Moving to our other women's brands Petal and Pup, which targets a slightly older customer base than Princess Polly and offers more elevated event based styles. Similar to the other brands in our portfolio, Petal and Puff has achieved great success in the U. S. As a direct to consumer brand. While the brand continues to grow its direct to consumer business, beginning in 2023, it also began testing omni channel opportunities to increase its total addressable market. Speaker 200:09:12I'm really excited to announce that Petal and Pub is expanding its distribution and is now live on Nordstrom's website, adding to the brand's successful marketplace presence at both Macy's and Target, which launched in the second half of last year. As a reminder, over 90% of customers that shop through marketplaces have been new to the Pedal and Pop brand, which demonstrates the power of expanding our distribution to new channels and getting in front of incremental customers. In the back half of twenty twenty three, Petal and Pub also tested wholesale arrangements with Victoria's Secret and one of Mexico's largest retailers, Liverpool. I'm pleased to report that based on positive results of the initial test, both retailers have reordered product in the first half of twenty twenty four. Turning now to our streetwear brands. Speaker 200:10:03Culture Kings continues to take off in strong double digit growth in both the Q4 and full fiscal year in the region. Culture Kings is creating more than just a fashion brand. It's fostering a lifestyle that's culturally relevant, on trend and where people go to be part of a community. They're disrupting the streetwear market and I remain very bullish on the brand's expansion in the U. S. Speaker 200:10:29And globally. The one of a kind flagship store in Las Vegas continues to activate its retailtainment ethos every day and they take it to the next level during key moments. The brand came to life in Las Vegas for Super Bowl weekend with in store events featuring Las Vegas Radar star, Davante Adams, global streaming icons, Kai C. Knot and RDC World and an in store event and appearance by celebrity jacket designer, Jeff Hamilton. The unique and next generation in store activations brought in thousands of customers and the store recorded its 2 largest revenue days on record, surpassing the grand opening and Formula 1 weekends. Speaker 200:11:13Culture Kings also continues to accelerate in brand awareness across the U. S. Through high profile brand marketing activations and collaborations with top tier partners. He is an official sponsor of Rolling Load in Los Angeles next week, where we'll have stage naming rights, a full court basketball experience and a new immersive element with on-site screen printing and exclusive merchandising collaboration. Culture Kings is also an official partner of UFC 300, the upcoming mixed martial arts events in Las Vegas next month, which will include an exclusive product range and indoor activations surrounding the main events. Speaker 200:11:57As an apparel led streetwear brand, Culture Kings is uniquely differentiated from many other footwear led streetwear brands, setting Culture Kings up for continued growth over the long term. We remain very excited by the performance of the 1st party apparel brands, which continue to be top sellers, both online and in the Las Vegas store. While the 1st party brands are a key priority, Kosher Kings also continues to add new brands with assortment, both emerging brands and large international players enhancing the brand's credibility in the streetwear space. Minimal, our other streetwear brand remains the top performing brand at the Culture King store in Las Vegas and is also accelerating its growth on its own platform as well. We're excited for a new exclusive capsule collection for Minimal with NBA star, Trishawn Man launching this spring. Speaker 200:12:52And the brand continues to be spotted on hundreds of celebrities and professional athletes. As part of the broader omni channel expansion plans, Culture Kings and Minimal are also expanding their distribution channels for their exclusive products through regional streetwear stores, starting with a more grassroots approach to reaching customers in an authentic way. Now, I'll give you more detail on the P and L before taking your questions. As I mentioned, for the Q4, net sales were $149,000,000 which was flat compared to the Q4 last year. In the U. Speaker 200:13:27S, we delivered strong sales growth of 12% compared to the Q4 last year, which is a nice sequential improvement from 2% growth in the 3rd quarter. Sales in the Australia and New Zealand region, although improved sequentially from the Q3, remained challenged and below our expectations, declining 12% as compared to the Q4 of last year. I'm pleased that net sales in the rest of world increased 9%, representing the strength of our brands internationally, which is a long term growth opportunity for us. Total orders for the Q4 were $2,000,000 an increase of 2% compared to the 4th quarter last year. In the U. Speaker 200:14:09S, we were pleased to see order growth of 23%, driven by higher traffic and our omni channel tests, which was slightly offset by lower demand in the Australia and New Zealand region where orders were down 9%. We served 3,700,000 active customers in the 4th quarter. On a sequential basis, active customers grew nearly 3%, despite a contraction of 12% in the Australia and New Zealand region. Importantly, we grew our active customer count in the U. S. Speaker 200:14:41By 5%. A reminder, our active customer count is calculated on a trailing 12 month basis. Our 4th quarter average order value of $76 represents a decrease of 1% compared to the Q4 last year on a reported basis and was down 2% in constant currency. Importantly, our return rate remains one of the lowest among our peers and was 17% for the 4th quarter, which was a 260 basis point improvement for the Q3 of this year. Moving now to profitability. Speaker 200:15:18Gross margin in the 4th quarter was 51.3% compared to 52.8% in the same period last year. Excluding the impact from actions we took in Culture Kings Australia, our gross margin would have expanded 90 basis points to 53.7% due to the strength in full price selling across our other brands. We continue to take action at Culture Kings in Australia, and while I'm pleased with the progress, there's more work ahead of us. Importantly, under new leadership, the team is rapidly converting to a test and repeat merchandising strategy similar to our successful and profitable women's brands, which will be fully implemented in the back half of the year. Selling expenses increased 8% to $42,000,000 compared to $39,000,000 in the Q4 of 2022. Speaker 200:16:09Selling expenses were 28 percent of net sales, up 2 20 basis points compared to the Q4 of last year, primarily due to the sales shortfall in the Australia and New Zealand region. Marketing expenses in the quarter were $17,300,000 compared to $15,400,000 in the Q4 of 2022. On a rate basis, marketing expenses were 11.6% of net sales, compared to 10.3 percent of net sales in the Q4 of 2022, which was in line with our expectations. We are working hard to improve our marketing effectiveness over the coming quarters and we and as we further our omni channel expansion efforts, we anticipate achieving improved levels of effectiveness. General and administrative expenses declined 15% to $22,300,000 compared to $26,100,000 in the Q4 of 2022. Speaker 200:17:06On a rate basis, G and A expenses were 15% of net sales compared to 17.5% of net sales in the Q4 of last year. This was due to lower performance bonuses and a decrease in insurance costs. We delivered adjusted EBITDA of $1,300,000 compared to $6,100,000 in the same period last year, which was within our guidance range. Adjusted EBITDA margin for the Q4 of 2023 was 0.9% compared to 4.1% in the same period last year. Turning now to the balance sheet. Speaker 200:17:42We continued to make substantial progress strengthening our balance sheet and we ended 2023 with significantly lowers of debt and an improved inventory position and composition, which as you remember was a key priority for us at the start of last year. We ended the quarter with $22,000,000 in cash and cash equivalents, and I'm very proud to highlight that we reduced our debt by 35% or $50,000,000 over the last year. And we ended 2023 with 90 $3,000,000 of debt and total liquidity of approximately $70,000,000 Turning now to inventory. I want to thank our teams for their continued work rightsizing our inventory in 2023. Total inventory was well managed with inventory dollars down 28% compared to last year. Speaker 200:18:32On a sequential basis, inventory was down 9% from the end of the Q3 of 2023. As I mentioned, the macro environment in Australia remains challenging and we continue to work aggressively to align Culture Kings Australia inventory in the region in preparation for the full transition to the test and repeat model in the back half of twenty twenty four. I'm pleased that inventory levels of Princess Polly, Pedal and Puff and Minimal are in good shape across all regions in terms of composition, newness and quality. We generated $33,000,000 of cash flow from operations in 2023 compared to cash use of $300,000 in 2022. In the Q4, we generated $15,000,000 of free cash flow, which compared to cash generation of $5,000,000 in the Q4 of 2022. Speaker 200:19:25I'm very pleased that our positive EBITDA coupled with prudent working capital management enables us to have a stable positive operating cash flow profile. A quick update on our stock repurchase program. In the Q4, we repurchased 175,000 161 shares for a total cost of approximately $1,300,000 As of the end of the year, we have $2,900,000 remaining in our share repurchase authorization. Now turning to our outlook for 2024 and beyond. As you've heard today, we remain laser focused on our strategic priorities to deliver a strong 2024, while setting the stage for an even stronger 2025. Speaker 200:20:12First, we will continue to deliver innovative retail strategies to reach our next generation customers. Secondly, we will expand our omni channel initiatives to reach new customers across multiple platforms and channels. And third, we will continue to streamline our operations to strengthen our financials. While we anticipate that the macro environment in the Australia region will remain dynamic and pressured in 2024, we're committed to building high quality and profitable fashion brands for the long term. For the full year, we expect to deliver between $540,000,000 to $555,000,000 in net sales. Speaker 200:20:52The other lines in the P and L, we expect gross margins between 55.5% and 56%. We expect gross margins will increase in the back half of the year as we lap the actions we took to move through inventory at Culture Kings in 2023. We anticipate selling expenses to be approximately 26% of net sales and marketing expenses of approximately 12.5%. Marketing expenses will be slightly higher in the Q1 and lever throughout the year as we expand our omni channel initiatives. We expect G and A expense between $100,000,000 $110,000,000 for the full year 2024. Speaker 200:21:34For the year, we expect adjusted EBITDA of between $16,000,000 $18,000,000 weighted average diluted share count of $10,700,000 dollars capital expenditures of $10,000,000 to $12,000,000 and an effective tax rate of 10%. For the Q1, we expect net sales between $108,000,000 $112,000,000 and adjusted EBITDA of between $300,000 $700,000 When I think about the long term, I'm confident that we have significant opportunity to deliver both growth and profit as Gen Z and Millennials continue to gain spending power. Our brands are young and at the beginning of their life cycle with a tremendous global runway ahead of them. Our flexible business model is working and we remain steadfast in our mission to be the next generation of retail for the next generation of consumers. We are just getting started tapping into the U. Speaker 200:22:30S. And we look to expand our international strategies in 2025 to accelerate growth even faster. I'm confident that we have highly talented teams who are motivated every day to serve our customers and grow these brands together. I'm looking forward to an exciting year. Now, we'll open it up for your questions. Operator00:23:28Our first question comes from the line of Youssef Squali with Truett Securities. Please proceed. Great. Thank you very much. Hi, Kieran. Operator00:23:35Thank you for taking the question. So starting with the weakness in Australia and New Zealand, can you maybe help us parse out what's macro and what's maybe specific execution issues of the company and what you're doing there? And also related to that, what's baked into the guide for flat revenues for 2024 between U. S. Growth and New Zealand and Australia and rest of the world? Operator00:24:00And then I have a follow-up. Speaker 300:24:03Thanks, Youssef. Yes, as we think about the Australian market, I think, overall, look, it was great to see the U. S. Market grow 12% in Q4. I think Australia down 12%, getting better than what we saw in Q3, but still very much a pressured market there. Speaker 300:24:26As we look across our brands, we were down from a similar perspective across them, I would say, more pronounced at Culture Kings, where we're not fully on the test and repeat model that we have fully implemented at the other brands and is really helping that growth and driving a lot of that growth that we saw in the U. S. Speaker 200:24:48Wes and the team who came over Speaker 300:24:50from Princess Polly are working hard to implement that test and repeat model. We expect to see the first product come in from that kind of mid Q2. And with that, we'd expect to see improvements in comps and improvements in gross margin as we go through the back half for Australia. Speaker 200:25:11As we think about the overall year next year, Yousef, Speaker 300:25:15from an Australia perspective, we are modeling to be in that kind of negative mid teens for the year. And I think we kind of expecting to be in negative mid-20s in Q1 and improving as we go through the year. And look, that's kind of somewhat based on what we see and knowing that the benefits of test and repeat will take some time to flow in there in the market. Operator00:25:42Okay. Thank you. That's helpful. And then on the debt management, help us think through the path to the debt repayment. Much of it is coming due when and how much money do you need to actually continue to run the business? Operator00:25:58What's the minimum amount you need to run the business? Thank you. Speaker 200:26:02Sure. Yes. Look, I think Speaker 300:26:04we're really happy that we paid down $50,000,000 of debt last year, down 35%. And really that coming from just the strong cash flows, the operating cash flows we had of $33,000,000 and obviously a big driver of that was the EBITDA we delivered, but also just bring down our inventory dollars by 35,000,000 last year. It's really helpful. Speaker 200:26:27I think as we think about our debt, it becomes due Speaker 300:26:31in September kind of Q3 2026, right. So, it's still a ways out. Speaker 200:26:37And I think as we think about that, Speaker 300:26:39we expect to continue to make progress on paying down their debt, strengthen the balance sheet as we go through this year and next. And look, that's just going to come from the operating model that we have. We continue to generate EBITDA and expect to have strong cash flows from our EBITDA and also just continued improving our working capital management as we go through this year and next. Operator00:27:07Okay. Thank you. Our next question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed. Speaker 100:27:23Great. Hi. Thanks for taking the question. So you talked a little bit about the implementation of that customer feed and culture teams and kind of how the gross margin is shaping. Was it returning to expansion around the same timeframe in the back half of the year? Speaker 100:27:37Just curious if there is anything else that's pressuring the gross margin line we should be aware of? And then just maybe in terms of how you're thinking about markdowns and promotions for the year? Thank you. Speaker 200:27:49Sure. Thanks, Ashley. Speaker 300:27:51As we think about FY 'twenty four, maybe we just kind of a lot of what informs that is, I would say, the progress we made on inventory last year. So it's been down $35,000,000 28 percent, I would say, across Princess Polly, Petal and Puff and Minimal, we feel really, really good about the composition, the quality of the inventory, the newness of the products we have. We can see that it's working well. I think as well, I'd just point out, right, the fact that we were able to bring down inventory that level and then to Speaker 200:28:27be excluding the actions Speaker 300:28:28we took at Culture Kings to be up 90 basis points in gross margin in Q4 is just a testament to the strength of the model. So, as we think of both FY 2024, I feel that we should expect see those improving gross margins as we go through the year, helped by the Culture Kings being on test and repeat. But also, we were we took a lot of pretty hard actions in Q3 and Q4 last year to move through that and progress inventory at Culture Kings. And that gives us confidence. I think there are other actions the teams are working hard on, getting the right mix of airfreight to see. Speaker 300:29:15We think there's opportunities there. And also, as we kind of we open up more of the omni channel opportunities and these wholesale opportunities, I think there's an opportunity to be less promotional on our own sites, which I think long term will all help gross margin and kind of get this the overall business back to the level of EBITDA production that we would expect. Speaker 100:29:40Great. Thank you. Operator00:30:03There are no further questions at this time. I'd like to turn the call back to Kieran Monk for closing remarks. Speaker 200:30:10Thank you. Thank you all for joining our call. We are proud Speaker 300:30:14of the progress we're making across the business, across the brand, across all of the teams, and it really is driven by individual team members. And I think it sets us up for a good 2024 and really shows the power of the operating model that we have and that these brands can go from strength to strength in the future. Operator00:30:40This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Calla.k.a. Brands Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) a.k.a. Brands Earnings HeadlinesWest Japan Railway and a.k.a. Brands have been highlighted as Zacks Bull and Bear of the DayApril 24, 2025 | msn.comBear of the Day: a.k.a. Brands Holding Corp. (AKA)April 24, 2025 | msn.comGold Hits New Highs as Global Markets SpiralWhen Trump took office in 2017, gold was just $1,100 an ounce. By the time he left, it had soared to $1,839. Now… as new tariffs take effect, gold is breaking records again. You've hopefully already seen this in action… but gold is surpassing $3,000 per ounce for the first time EVER.May 7, 2025 | Premier Gold Co (Ad)a.k.a. Brands rises 13.8%April 3, 2025 | markets.businessinsider.coma.k.a. Brands rises 7.1%April 2, 2025 | markets.businessinsider.coma.k.a. Brands falls -9.0%April 1, 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. Brands ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Coinbase Global (5/8/2025)Monster Beverage (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Shopify (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 4 speakers on the call. Operator00:00:00Greetings, and welcome to the AKA Brands 4th Quarter and Fiscal 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. At this time, I would now like to turn the conference over to your host, Emily Schwartz. Speaker 100:00:25Good afternoon. Thank you for joining AKA Brands' 4th quarter and fiscal 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 is Kieran 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 100:00:57Forward 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 update any such forward looking statements. This call will contain non GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, adjusted gross margin and free cash flow. 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. Speaker 100:01:29With that, I'll turn the call over to Kieran. Speaker 200:01:32Thanks, Emily. Good afternoon, everyone, and thanks for joining our call. 2023 was a transformational year for AKA, and I want to thank our teams for their continued dedication to building next generation fashion brands for the next generation of consumers. As a group, we stepped up to every challenge, created new opportunities, expanded our customer touch points and significantly strengthened our balance sheet. Before I go through the results, I want to share a few highlights from the year. Speaker 200:02:03We delivered U. S. Net sales growth of 1%, inclusive of 12% growth in the 4th quarter. We generated $33,000,000 of operating cash flow. We reduced our year end inventory by 28% compared to last year. Speaker 200:02:19We paid down approximately $50,000,000 of debt, reducing our debt levels by 35%. We opened a Princess Polly store in Los Angeles, propelling the brand into physical retail for the first time. Culture Kings demand continued to accelerate in the U. S. And registered double digit net sales growth for the year. Speaker 200:02:40And lastly, we tested and expanded a number of omni channel initiatives across our brands, including wholesale engagements with PacSun, Victoria's Secret and Liverpool, and marketplace partnerships with Target and Macy's, which exceeded our expectations. Turning now to the Q4. We delivered $149,000,000 of net sales, which was flat to last year. As I mentioned, we were very pleased that the U. S. Speaker 200:03:07Business grew 12% in the 4th quarter, which is a testament to the strength of our offering. As a reminder, our U. S. Region is now our largest market and where we see the greatest potential moving forward. Despite the strength in the U. Speaker 200:03:22S, our total net sales came in slightly below expectations due to the ongoing headwinds in the Australia and New Zealand region. And we delivered $1,300,000 of adjusted EBITDA, which was in line with our expectations. I'm really pleased that we ended the 4th quarter feeling confident with our current inventory composition and levels, which decreased 28% as compared to 2022. And lastly, we paid off an additional $13,000,000 of debt in the 4th quarter, further strengthening our balance sheet. For the full year, we delivered $546,000,000 in net sales. Speaker 200:04:01And despite the challenging macro environment in Australia, we delivered $14,000,000 of adjusted EBITDA for the year. As we look at 2024, we have 3 key strategic priorities driving our strategic framework. 1st, we will continue to deliver innovative next generation retail strategies to attract and retain customers. This includes the evolution of our test and repeat merchandising approach, delivering newness to customers weekly, expanding our product categories, particularly at our women's brands and leveraging technology and differentiated marketing strategies to deepen our direct relationships with our customers. 2nd, as we look to the future of fashion retail, we are confident that winning brands will be wherever their customer is, whether that's online, in experiential stores, or through marketplace and wholesale channels. Speaker 200:04:56We are committed to showing up for our customers wherever they seek inspiration and transact. Based on the success of our omnichannel tests last year, we're excited to scale our omnichannel initiatives in 2024, which I'll take you through shortly. And third, we will continue to streamline our operations to deliver financial benefits across the company. We are focused on rapidly providing gross margin expansion in the back half of the year. And we're committed to finding additional operating efficiencies to drive rate improvements across the P and L. Speaker 200:05:38Now let me share some recent highlights from our brands as well as growth drivers for the year. Starting off with Princess Polly, our largest brand that targets Gen Z and Millennium women with on trend quality fashion. Princess Polly has gained tremendous popularity in the U. S. Over the last few years, primarily as a direct to consumer online brand. Speaker 200:06:01As I mentioned, as we continue to build durable brands for the future, we're committed to staying in front of our customers no matter the channel. Based on direct customer feedback and a shifting retail landscape, we're thrilled that Princess Polly opened its first store in Century City, LA in September 2023. This marked the first time that customers were able to truly interact with Princess Polly in real life and the feedback was resoundingly positive. The store in the Westfield Century City Mall allows the authentic relationships and community that Princess Polly has built over the last decade come to life in person, further strengthening brand affinity and loyalty. The store is also used as a marketing engine for content creation and in store events, including a successful influencer Friendsgiving event in the Q4 and more to come this year. Speaker 200:06:55Based on the success of the first store, Princess Polly will expand its store footprint by 3 to 4 stores in 2024 and I'm excited to announce that we've officially signed leases on a store on Newbury Street in Boston and another store in the Fashion Volley Mall in San Diego, which are both slated to open in the Q3 of the year. I look forward to sharing more details on the store openings and further store expansion plans in the coming quarters. Equally as important as Princess Polly store expansion strategy is their continued focus on innovating, staying ahead of trends and driving next generation retail strategies online. Through the use of data analytics and customer feedback, Princess Polly is launching several new categories in 2024 with sleepwear and loungewear already launched in January and performing ahead of expectations. This month, we also launched an activewear collection and we have plans for additional new categories as the year unfolds. Speaker 200:07:56We're confident that a broader assortment of fashion styles will resonate with their existing customers and attract new customers to the brand. Princess Polly is constantly innovating to enhance our direct connection with customers and reach new customers on every platform. TikTok remains the preferred platform for Princess Polly customers with over 54,000,000 TikTok views reaching over 40,000,000 people worldwide. In 2024, Princess Polly will harness the power of TikTok to both tell their brand story and drive sales. They're fine tuning the strategy, including expanding their TikTok content team and investing in more paid opportunities as well as scaling their TikTok influencer program. Speaker 200:08:41Moving to our other women's brands Petal and Pup, which targets a slightly older customer base than Princess Polly and offers more elevated event based styles. Similar to the other brands in our portfolio, Petal and Puff has achieved great success in the U. S. As a direct to consumer brand. While the brand continues to grow its direct to consumer business, beginning in 2023, it also began testing omni channel opportunities to increase its total addressable market. Speaker 200:09:12I'm really excited to announce that Petal and Pub is expanding its distribution and is now live on Nordstrom's website, adding to the brand's successful marketplace presence at both Macy's and Target, which launched in the second half of last year. As a reminder, over 90% of customers that shop through marketplaces have been new to the Pedal and Pop brand, which demonstrates the power of expanding our distribution to new channels and getting in front of incremental customers. In the back half of twenty twenty three, Petal and Pub also tested wholesale arrangements with Victoria's Secret and one of Mexico's largest retailers, Liverpool. I'm pleased to report that based on positive results of the initial test, both retailers have reordered product in the first half of twenty twenty four. Turning now to our streetwear brands. Speaker 200:10:03Culture Kings continues to take off in strong double digit growth in both the Q4 and full fiscal year in the region. Culture Kings is creating more than just a fashion brand. It's fostering a lifestyle that's culturally relevant, on trend and where people go to be part of a community. They're disrupting the streetwear market and I remain very bullish on the brand's expansion in the U. S. Speaker 200:10:29And globally. The one of a kind flagship store in Las Vegas continues to activate its retailtainment ethos every day and they take it to the next level during key moments. The brand came to life in Las Vegas for Super Bowl weekend with in store events featuring Las Vegas Radar star, Davante Adams, global streaming icons, Kai C. Knot and RDC World and an in store event and appearance by celebrity jacket designer, Jeff Hamilton. The unique and next generation in store activations brought in thousands of customers and the store recorded its 2 largest revenue days on record, surpassing the grand opening and Formula 1 weekends. Speaker 200:11:13Culture Kings also continues to accelerate in brand awareness across the U. S. Through high profile brand marketing activations and collaborations with top tier partners. He is an official sponsor of Rolling Load in Los Angeles next week, where we'll have stage naming rights, a full court basketball experience and a new immersive element with on-site screen printing and exclusive merchandising collaboration. Culture Kings is also an official partner of UFC 300, the upcoming mixed martial arts events in Las Vegas next month, which will include an exclusive product range and indoor activations surrounding the main events. Speaker 200:11:57As an apparel led streetwear brand, Culture Kings is uniquely differentiated from many other footwear led streetwear brands, setting Culture Kings up for continued growth over the long term. We remain very excited by the performance of the 1st party apparel brands, which continue to be top sellers, both online and in the Las Vegas store. While the 1st party brands are a key priority, Kosher Kings also continues to add new brands with assortment, both emerging brands and large international players enhancing the brand's credibility in the streetwear space. Minimal, our other streetwear brand remains the top performing brand at the Culture King store in Las Vegas and is also accelerating its growth on its own platform as well. We're excited for a new exclusive capsule collection for Minimal with NBA star, Trishawn Man launching this spring. Speaker 200:12:52And the brand continues to be spotted on hundreds of celebrities and professional athletes. As part of the broader omni channel expansion plans, Culture Kings and Minimal are also expanding their distribution channels for their exclusive products through regional streetwear stores, starting with a more grassroots approach to reaching customers in an authentic way. Now, I'll give you more detail on the P and L before taking your questions. As I mentioned, for the Q4, net sales were $149,000,000 which was flat compared to the Q4 last year. In the U. Speaker 200:13:27S, we delivered strong sales growth of 12% compared to the Q4 last year, which is a nice sequential improvement from 2% growth in the 3rd quarter. Sales in the Australia and New Zealand region, although improved sequentially from the Q3, remained challenged and below our expectations, declining 12% as compared to the Q4 of last year. I'm pleased that net sales in the rest of world increased 9%, representing the strength of our brands internationally, which is a long term growth opportunity for us. Total orders for the Q4 were $2,000,000 an increase of 2% compared to the 4th quarter last year. In the U. Speaker 200:14:09S, we were pleased to see order growth of 23%, driven by higher traffic and our omni channel tests, which was slightly offset by lower demand in the Australia and New Zealand region where orders were down 9%. We served 3,700,000 active customers in the 4th quarter. On a sequential basis, active customers grew nearly 3%, despite a contraction of 12% in the Australia and New Zealand region. Importantly, we grew our active customer count in the U. S. Speaker 200:14:41By 5%. A reminder, our active customer count is calculated on a trailing 12 month basis. Our 4th quarter average order value of $76 represents a decrease of 1% compared to the Q4 last year on a reported basis and was down 2% in constant currency. Importantly, our return rate remains one of the lowest among our peers and was 17% for the 4th quarter, which was a 260 basis point improvement for the Q3 of this year. Moving now to profitability. Speaker 200:15:18Gross margin in the 4th quarter was 51.3% compared to 52.8% in the same period last year. Excluding the impact from actions we took in Culture Kings Australia, our gross margin would have expanded 90 basis points to 53.7% due to the strength in full price selling across our other brands. We continue to take action at Culture Kings in Australia, and while I'm pleased with the progress, there's more work ahead of us. Importantly, under new leadership, the team is rapidly converting to a test and repeat merchandising strategy similar to our successful and profitable women's brands, which will be fully implemented in the back half of the year. Selling expenses increased 8% to $42,000,000 compared to $39,000,000 in the Q4 of 2022. Speaker 200:16:09Selling expenses were 28 percent of net sales, up 2 20 basis points compared to the Q4 of last year, primarily due to the sales shortfall in the Australia and New Zealand region. Marketing expenses in the quarter were $17,300,000 compared to $15,400,000 in the Q4 of 2022. On a rate basis, marketing expenses were 11.6% of net sales, compared to 10.3 percent of net sales in the Q4 of 2022, which was in line with our expectations. We are working hard to improve our marketing effectiveness over the coming quarters and we and as we further our omni channel expansion efforts, we anticipate achieving improved levels of effectiveness. General and administrative expenses declined 15% to $22,300,000 compared to $26,100,000 in the Q4 of 2022. Speaker 200:17:06On a rate basis, G and A expenses were 15% of net sales compared to 17.5% of net sales in the Q4 of last year. This was due to lower performance bonuses and a decrease in insurance costs. We delivered adjusted EBITDA of $1,300,000 compared to $6,100,000 in the same period last year, which was within our guidance range. Adjusted EBITDA margin for the Q4 of 2023 was 0.9% compared to 4.1% in the same period last year. Turning now to the balance sheet. Speaker 200:17:42We continued to make substantial progress strengthening our balance sheet and we ended 2023 with significantly lowers of debt and an improved inventory position and composition, which as you remember was a key priority for us at the start of last year. We ended the quarter with $22,000,000 in cash and cash equivalents, and I'm very proud to highlight that we reduced our debt by 35% or $50,000,000 over the last year. And we ended 2023 with 90 $3,000,000 of debt and total liquidity of approximately $70,000,000 Turning now to inventory. I want to thank our teams for their continued work rightsizing our inventory in 2023. Total inventory was well managed with inventory dollars down 28% compared to last year. Speaker 200:18:32On a sequential basis, inventory was down 9% from the end of the Q3 of 2023. As I mentioned, the macro environment in Australia remains challenging and we continue to work aggressively to align Culture Kings Australia inventory in the region in preparation for the full transition to the test and repeat model in the back half of twenty twenty four. I'm pleased that inventory levels of Princess Polly, Pedal and Puff and Minimal are in good shape across all regions in terms of composition, newness and quality. We generated $33,000,000 of cash flow from operations in 2023 compared to cash use of $300,000 in 2022. In the Q4, we generated $15,000,000 of free cash flow, which compared to cash generation of $5,000,000 in the Q4 of 2022. Speaker 200:19:25I'm very pleased that our positive EBITDA coupled with prudent working capital management enables us to have a stable positive operating cash flow profile. A quick update on our stock repurchase program. In the Q4, we repurchased 175,000 161 shares for a total cost of approximately $1,300,000 As of the end of the year, we have $2,900,000 remaining in our share repurchase authorization. Now turning to our outlook for 2024 and beyond. As you've heard today, we remain laser focused on our strategic priorities to deliver a strong 2024, while setting the stage for an even stronger 2025. Speaker 200:20:12First, we will continue to deliver innovative retail strategies to reach our next generation customers. Secondly, we will expand our omni channel initiatives to reach new customers across multiple platforms and channels. And third, we will continue to streamline our operations to strengthen our financials. While we anticipate that the macro environment in the Australia region will remain dynamic and pressured in 2024, we're committed to building high quality and profitable fashion brands for the long term. For the full year, we expect to deliver between $540,000,000 to $555,000,000 in net sales. Speaker 200:20:52The other lines in the P and L, we expect gross margins between 55.5% and 56%. We expect gross margins will increase in the back half of the year as we lap the actions we took to move through inventory at Culture Kings in 2023. We anticipate selling expenses to be approximately 26% of net sales and marketing expenses of approximately 12.5%. Marketing expenses will be slightly higher in the Q1 and lever throughout the year as we expand our omni channel initiatives. We expect G and A expense between $100,000,000 $110,000,000 for the full year 2024. Speaker 200:21:34For the year, we expect adjusted EBITDA of between $16,000,000 $18,000,000 weighted average diluted share count of $10,700,000 dollars capital expenditures of $10,000,000 to $12,000,000 and an effective tax rate of 10%. For the Q1, we expect net sales between $108,000,000 $112,000,000 and adjusted EBITDA of between $300,000 $700,000 When I think about the long term, I'm confident that we have significant opportunity to deliver both growth and profit as Gen Z and Millennials continue to gain spending power. Our brands are young and at the beginning of their life cycle with a tremendous global runway ahead of them. Our flexible business model is working and we remain steadfast in our mission to be the next generation of retail for the next generation of consumers. We are just getting started tapping into the U. Speaker 200:22:30S. And we look to expand our international strategies in 2025 to accelerate growth even faster. I'm confident that we have highly talented teams who are motivated every day to serve our customers and grow these brands together. I'm looking forward to an exciting year. Now, we'll open it up for your questions. Operator00:23:28Our first question comes from the line of Youssef Squali with Truett Securities. Please proceed. Great. Thank you very much. Hi, Kieran. Operator00:23:35Thank you for taking the question. So starting with the weakness in Australia and New Zealand, can you maybe help us parse out what's macro and what's maybe specific execution issues of the company and what you're doing there? And also related to that, what's baked into the guide for flat revenues for 2024 between U. S. Growth and New Zealand and Australia and rest of the world? Operator00:24:00And then I have a follow-up. Speaker 300:24:03Thanks, Youssef. Yes, as we think about the Australian market, I think, overall, look, it was great to see the U. S. Market grow 12% in Q4. I think Australia down 12%, getting better than what we saw in Q3, but still very much a pressured market there. Speaker 300:24:26As we look across our brands, we were down from a similar perspective across them, I would say, more pronounced at Culture Kings, where we're not fully on the test and repeat model that we have fully implemented at the other brands and is really helping that growth and driving a lot of that growth that we saw in the U. S. Speaker 200:24:48Wes and the team who came over Speaker 300:24:50from Princess Polly are working hard to implement that test and repeat model. We expect to see the first product come in from that kind of mid Q2. And with that, we'd expect to see improvements in comps and improvements in gross margin as we go through the back half for Australia. Speaker 200:25:11As we think about the overall year next year, Yousef, Speaker 300:25:15from an Australia perspective, we are modeling to be in that kind of negative mid teens for the year. And I think we kind of expecting to be in negative mid-20s in Q1 and improving as we go through the year. And look, that's kind of somewhat based on what we see and knowing that the benefits of test and repeat will take some time to flow in there in the market. Operator00:25:42Okay. Thank you. That's helpful. And then on the debt management, help us think through the path to the debt repayment. Much of it is coming due when and how much money do you need to actually continue to run the business? Operator00:25:58What's the minimum amount you need to run the business? Thank you. Speaker 200:26:02Sure. Yes. Look, I think Speaker 300:26:04we're really happy that we paid down $50,000,000 of debt last year, down 35%. And really that coming from just the strong cash flows, the operating cash flows we had of $33,000,000 and obviously a big driver of that was the EBITDA we delivered, but also just bring down our inventory dollars by 35,000,000 last year. It's really helpful. Speaker 200:26:27I think as we think about our debt, it becomes due Speaker 300:26:31in September kind of Q3 2026, right. So, it's still a ways out. Speaker 200:26:37And I think as we think about that, Speaker 300:26:39we expect to continue to make progress on paying down their debt, strengthen the balance sheet as we go through this year and next. And look, that's just going to come from the operating model that we have. We continue to generate EBITDA and expect to have strong cash flows from our EBITDA and also just continued improving our working capital management as we go through this year and next. Operator00:27:07Okay. Thank you. Our next question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed. Speaker 100:27:23Great. Hi. Thanks for taking the question. So you talked a little bit about the implementation of that customer feed and culture teams and kind of how the gross margin is shaping. Was it returning to expansion around the same timeframe in the back half of the year? Speaker 100:27:37Just curious if there is anything else that's pressuring the gross margin line we should be aware of? And then just maybe in terms of how you're thinking about markdowns and promotions for the year? Thank you. Speaker 200:27:49Sure. Thanks, Ashley. Speaker 300:27:51As we think about FY 'twenty four, maybe we just kind of a lot of what informs that is, I would say, the progress we made on inventory last year. So it's been down $35,000,000 28 percent, I would say, across Princess Polly, Petal and Puff and Minimal, we feel really, really good about the composition, the quality of the inventory, the newness of the products we have. We can see that it's working well. I think as well, I'd just point out, right, the fact that we were able to bring down inventory that level and then to Speaker 200:28:27be excluding the actions Speaker 300:28:28we took at Culture Kings to be up 90 basis points in gross margin in Q4 is just a testament to the strength of the model. So, as we think of both FY 2024, I feel that we should expect see those improving gross margins as we go through the year, helped by the Culture Kings being on test and repeat. But also, we were we took a lot of pretty hard actions in Q3 and Q4 last year to move through that and progress inventory at Culture Kings. And that gives us confidence. I think there are other actions the teams are working hard on, getting the right mix of airfreight to see. Speaker 300:29:15We think there's opportunities there. And also, as we kind of we open up more of the omni channel opportunities and these wholesale opportunities, I think there's an opportunity to be less promotional on our own sites, which I think long term will all help gross margin and kind of get this the overall business back to the level of EBITDA production that we would expect. Speaker 100:29:40Great. Thank you. Operator00:30:03There are no further questions at this time. I'd like to turn the call back to Kieran Monk for closing remarks. Speaker 200:30:10Thank you. Thank you all for joining our call. We are proud Speaker 300:30:14of the progress we're making across the business, across the brand, across all of the teams, and it really is driven by individual team members. And I think it sets us up for a good 2024 and really shows the power of the operating model that we have and that these brands can go from strength to strength in the future. Operator00:30:40This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by