A.K.A. Brands Holding Corp. ((AKA)) has held its Q2 earnings call. Read on for the main highlights of the call.
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A.K.A. Brands Holding Corp. recently held its earnings call, reflecting a robust performance marked by continued growth in sales and successful expansion into new channels. Despite facing challenges related to tariffs that affected the gross margin, the company has undertaken strategic actions such as supply chain diversification and price adjustments to mitigate these impacts. Overall, the positive aspects of the earnings call outweigh the negatives, with strong growth indicators and strategic initiatives positioning the company well for future success.
Net Sales Growth
A.K.A. Brands reported a significant increase in net sales, which grew approximately 9.5% on a constant currency basis to $160.5 million. This marks the fifth consecutive quarter of growth, with the U.S. market leading the charge, delivering a 14% increase in net sales during the quarter.
Omnichannel Expansion Success
The company has seen success in its omnichannel expansion, with Princess Polly opening three new stores in the second quarter and planning to open 8 to 10 more by 2026. New channels have exceeded expectations, and wholesale partnerships, especially with Nordstrom, are boosting brand awareness.
Adjusted EBITDA Achievement
A.K.A. Brands achieved $7.5 million in adjusted EBITDA, aligning with expectations and demonstrating the company’s operational efficiency and financial health.
Supply Chain Diversification
The transition to a more diversified supply chain is progressing as planned, with products from new vendors showing promising lead times, quality, and costs, which is crucial for mitigating tariff impacts.
Strong Brand Performance
Princess Polly and Petal & Pup have performed well, with their debut in Nordstrom’s chain-wide locations receiving positive feedback. Additionally, Princess Polly’s TikTok Shop revenue increased by 60% year-over-year, highlighting the brand’s strong market presence.
Debt and Leverage Improvement
The company has made strides in improving its financial leverage, reducing it to 3.5x from 5.5x in the same quarter last year, showcasing effective debt management.
Tariff Impact on Gross Margin
Despite a 20 basis point decline in gross margin to 57.5% due to elevated China tariffs, the company is actively working to counteract this with strategic measures.
Inventory Challenges
Inventory levels were down 13% compared to the previous year, driven by elevated tariffs and strategic actions to manage inventory effectively.
Q3 Gross Margin Forecast
The third quarter gross margin is expected to face a similar 120 basis point impact due to tariffs, but the company is optimistic about offsetting these challenges through sourcing diversification and strategic pricing.
Forward-Looking Guidance
Looking ahead, A.K.A. Brands has raised its net sales outlook for the full year to between $608 million and $612 million. The company expects its efforts in sourcing diversification and strategic price increases to offset the current tariff impacts, setting a positive tone for future growth.
In summary, A.K.A. Brands Holding Corp.’s earnings call painted a positive picture of the company’s current performance and future prospects. With strong sales growth, successful expansion strategies, and effective measures to counteract tariff impacts, the company is well-positioned for continued success in the coming quarters.