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AB

A.K.A. BRANDS HOLDING CORP. (AKA)·Q2 2025 Earnings Summary

Executive Summary

  • Net sales grew 7.8% year over year to $160.5M, with U.S. up 13.7%; Adjusted EBITDA was $7.5M and gross margin 57.5% despite a 120bps tariff headwind in Q2, marking the fifth consecutive quarter of growth .
  • Wall Street consensus expected $155.8M revenue and -$0.52 EPS; AKA delivered $160.5M and -$0.34 EPS, a beat on both top-line and EPS versus S&P Global consensus* .
  • Management raised FY25 guidance: net sales to $608–$612M (from $600–$610M) and Adjusted EBITDA to $24.5–$27.5M (from $24.0–$27.5M); capex lifted to $14–$16M (from $12–$14M) .
  • Catalysts: accelerating omnichannel build (three Princess Polly stores opened in Q2, wholesale chain-wide Nordstrom debut), tariff mitigation via diversified sourcing and measured price increases expected to normalize margins from Q4 onward .

What Went Well and What Went Wrong

  • What Went Well

    • Fifth straight quarter of growth; U.S. net sales up 14% with strong DTC and wholesale traction; “We’re pleased to report a strong second quarter… our fifth consecutive quarter of growth” — CEO .
    • Omnichannel expansion ahead of plan: Princess Polly opened three new stores in Q2 (Miami, Columbus, Glendale) with plans for 13 by year-end; Nordstrom chain-wide debut for Princess Polly and Petal & Pup exceeded expectations .
    • Australia/New Zealand showing stabilization; Culture Kings’ in-house brands growing double digits under test-and-repeat model .

  • What Went Wrong

    • Gross margin compressed 20bps YoY to 57.5% due to tariffs; tariff inventory created a net ~120bps drag in Q2 and expected similar impact in Q3 .
    • Selling expenses rose to 28.3% of sales (from 27.7%) on expanded retail footprint and temporary labor inefficiencies during tariff-driven inventory timing .
    • Net loss widened to -$3.6M (-$0.34 EPS) vs. -$2.3M (-$0.22) YoY; rest of world sales down 19.4% YoY .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$148.931 $128.657 $160.524
Diluted EPS ($USD)-$0.22 -$0.78 -$0.34
Gross Margin (%)57.7% 57.2% 57.5%
Adjusted EBITDA ($USD Millions)$8.012 $2.665 $7.520
Adjusted EBITDA Margin (%)5.4% 2.1% 4.7%

Regional Sales

RegionQ2 2024 ($USD ‘000)Q2 2025 ($USD ‘000)YoY Change
U.S.$95,375 $108,440 +13.7%
Australia & New Zealand$45,650 $45,713 +0.1%
Rest of World$7,906 $6,371 -19.4%
Total$148,931 $160,524 +7.8%

KPIs

KPIQ2 2024Q1 2025Q2 2025
Active Customers (MM, TTM)4.01 4.13 4.13
Average Order Value ($)$78 $78 $78
Number of Orders (MM)1.92 1.66 2.05

Balance Sheet Highlights (end of period)

MetricDec 31, 2024Mar 31, 2025Jun 30, 2025
Cash & Equivalents ($MM)$24.2 $26.7 $23.1
Inventory ($MM)$95.8 $94.4 $92.5
Debt ($MM)$111.7 $119.9 $108.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($MM)FY 2025$600–$610 $608–$612 Raised
Adjusted EBITDA ($MM)FY 2025$24.0–$27.5 $24.5–$27.5 Raised
Capital Expenditures ($MM)FY 2025$12–$14 $14–$16 Raised
Weighted Avg Diluted Shares (MM)FY 202510.8 10.8 Maintained
Net Sales ($MM)Q3 2025—$154–$158 New
Adjusted EBITDA ($MM)Q3 2025—$7.3–$7.7 New
Gross Margin (%)Q3 2025—57.6%–57.8% New
Weighted Avg Diluted Shares (MM)Q3 2025—10.9 New
Modeling ItemsFY 2025—SBC $8–$10MM; D&A $19–$21MM; Interest/Other $13–$15MM; ETR ~ -25% New detail

Earnings Call Themes & Trends

TopicQ4 2024 (Prev.)Q1 2025 (Prev.)Q2 2025 (Current)Trend
Tariffs & Sourcing Diversification2025 plans, early tariff context in outlook 3‑pronged plan; diversify to Vietnam/Turkey; selective pricing; minimal China exposure in Q4 “Sourcing diversification and strategic price increases will offset tariffs in Q4 and beyond”; tariff drove ~120bps GM headwind in Q2 and expected similar in Q3 Improving mitigation
Omnichannel (Princess Polly stores)7 stores planned for 2025 SoHo opened; fleet outperforming; halo effect; 13 by YE 3 new stores opened in Q2; first AU store in Bondi later Q4; 8–10 stores planned for 2026 Accelerating
Wholesale partnershipsExpand PP and Petal & Pup to all Nordstrom locations in Q1 Early Nordstrom results exceeding expectations; Petal & Pup adding Dillard’s, Stitch Fix Chain-wide Nordstrom debut successful; fall/homecoming collections and activations Strengthening
Culture Kings test‑and‑repeatTransition highlighted In‑house brands +40% YoY AU; retailtainment activations In‑house brands double‑digit growth; WWE event; Adidas partnership for 2026 Improving
Australia & NZ-9.6% YoY in Q4 +6.2% YoY in Q1 Flat YoY in Q2; margins improved; expect flat to slightly up in H2 Stabilizing
Pricing actions—Selective pricing opportunity 5–8% U.S. price increases across significant assortment Implemented
Leverage & debt—Leverage down to 3.7x YoY Leverage down to 3.5x; confident in refinancing debt due Sep 2026 Improving

Management Commentary

  • “We’re pleased to report a strong second quarter… fifth consecutive quarter of growth… Momentum in the U.S. remained strong… We delivered $7.5 million of adjusted EBITDA for the second quarter, in line with our expectations.” — CEO Ciaran Long .
  • “Our sourcing diversification initiatives are on schedule… confident that we have established a world-class, flexible supply chain… adapt as our business grows and future trade dynamics evolve.” — CEO .
  • “Princess Polly opened three new stores in the second quarter and is on track to reach 13 locations by year-end… successful chain wide debut of Princess Polly and Petal & Pup at Nordstrom.” — CEO .
  • “Benefiting from strong top-line growth… we delivered $7.5 million of adjusted EBITDA.” — CEO .
  • CFO on margins/tariffs: “Gross margin declined 20 basis points… however… inventory received and sold in Q2 when China tariff was at its most elevated rate had a net 120 basis point transitory headwind… similar impact in Q3.” .

Q&A Highlights

  • Distribution mix long-term: Management sees continued DTC strength with expanding retail and wholesale; stores bring ~30% new customers and drive halo to digital; Nordstrom broadens category exposure; plan to open 8–10 Princess Polly stores in 2026 .
  • Gross margin trajectory: Q2 GM 57.5% ahead of expectations despite ~120bps tariff drag; Q3 GM guided to 57.6–57.8% as tariff inventory sells through; normalization from Q4 as sourcing/pricing offsets current tariff levels .
  • Active customers/orders: TTM active customers +3%; order growth +6.8%; omnichannel and test‑and‑repeat merchandising underpin engagement and frequency .
  • Pricing actions: U.S. price increases of 5–8% across a significant portion of assortment, supported by product exclusivity and monitored for elasticity .
  • Wholesale pipeline beyond Nordstrom: Petal & Pup building pipeline with Dillard’s and Stitch Fix; Nordstrom activations continue; Princess Polly focused on DTC and stores .
  • Store learnings: Larger footprints and broader assortments improve conversion; visual merchandising upgrades; new store openings maintain ~2‑year payback targets .
  • Debt/refinancing: Leverage reduced to ~3.5x; debt due Sep 2026 with confidence in refinancing based on momentum and brand resonance .

Estimates Context

  • Versus S&P Global consensus: Revenue $155.8M* vs actual $160.5M; EPS -$0.52* vs actual -$0.34 — both beats .
  • Q3 2025 consensus at time of pull: revenue $154.9M*, EPS -$0.38*; company guided revenue $154–$158M and Adjusted EBITDA $7.3–$7.7M .

Values marked with * retrieved from S&P Global.

MetricQ4 2024Q1 2025Q2 2025Q3 2025FY 2025
Revenue Consensus Mean ($USD)158.98M*122.37M*155.82M*154.87M*600.68M*
Primary EPS Consensus Mean ($)-0.16*-0.80*-0.52*-0.38*-2.40*
Actual Revenue ($USD)159.02M 128.66M 160.52M ——
Actual Diluted EPS ($)-0.88 -0.78 -0.34 ——

Key Takeaways for Investors

  • Top-line strength with fifth consecutive growth quarter, driven by U.S. demand and omnichannel expansion; wholesale chain-wide rollout at Nordstrom is broadening reach .
  • Tariff headwinds are transitory; management expects sourcing diversification and price increases to offset tariffs from Q4 onward, with Q3 GM guided to 57.6–57.8% .
  • FY25 guidance raised for revenue and Adjusted EBITDA, signaling confidence into H2 and early 2026 store pipeline (8–10 Princess Polly stores planned in 2026) .
  • Culture Kings turnaround continues via in-house brands and retailtainment; Australia stabilizing, providing incremental margin support .
  • Balance sheet improving (inventory down 13% YoY; leverage ~3.5x); management confident in 2026 debt refinance .
  • Near-term trading: Expect focus on Q3 margin delivery amid remaining tariff inventory; any updates on trade policy or sourcing milestones could move sentiment .
  • Medium-term: Omnichannel scale (stores + wholesale) and diversified sourcing should expand TAM and support margin normalization and EBITDA growth .

Notes: Financials reflect GAAP unless noted; Adjusted EBITDA is non-GAAP as defined by the company .