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AB

A.K.A. BRANDS HOLDING CORP. (AKA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue missed consensus; net sales were $147.1M vs Wall Street’s $154.9M, driven by temporary supply-chain transition disruptions that reduced in-stock levels and fashion newness; gross margin expanded to 59.1% on higher store mix, less promo and duty drawback . Actual vs consensus comparisons shown below, with EPS based on S&P Global “Primary EPS” benchmarks.*
  • Management cut FY 2025 guidance: net sales to $598–$602M (from $608–$612M) and adjusted EBITDA to $23.0–$23.5M (from $24.5–$27.5M); capex raised to $16–$18M, reflecting retail expansion and omnichannel investments .
  • CEO: “Fourth quarter-to-date net sales are tracking up low single digits vs last year,” as inventories normalize; Q4 gross margin outlook is 56.6%–57.0% .
  • Balance sheet strengthened via refinancing: term loan $85M and revolver ≈$35M, maturities extended to 2028; net leverage down to 3.8x vs 4.8x last year .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded 110 bps YoY to 59.1% on store mix, reduced promotions, Culture Kings margin improvement, and duty drawback benefit .
  • Australia/NZ grew 5.1% YoY; orders rose 2.2%, active customers up modestly; Princess Polly store fleet and Nordstrom wholesale performing ahead of plan .
  • Strategic progress: refinancing to 2028, supply chain diversification, and retail/wholesale expansion. “We successfully refinanced our debt… and advanced the optimization of our sourcing structure” — CEO Ciaran Long . “We now feel confident in our inventory levels and our updated supply chain” .

What Went Wrong

  • Top-line miss vs consensus (details below) and adjusted EBITDA delivered $7.0M vs prior Q3 guide of $7.3–$7.7M; AOV fell 3.7% on out-of-stocks in best-sellers and reduced newness .
  • U.S. net sales declined 3.6% YoY; Rest of world down 25.4% YoY; marketing spend was pulled back in late Aug–Sept to avoid inefficient spend amid inventory constraints .
  • EPS loss per share of -$0.46 and net loss of -$5.0M reflect higher selling costs from retail expansion and deleverage on fixed costs amid softer sales .

Financial Results

Core P&L and Margins (Company-reported)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$128.657 $160.524 $147.077
GAAP Diluted EPS ($)-$0.78 -$0.34 -$0.46
Gross Margin (%)57.2% 57.5% 59.1%
Adjusted EBITDA ($USD Millions)$2.665 $7.520 $7.022
Adjusted EBITDA Margin (%)2.1% 4.7% 4.8%

Actual vs Wall Street Consensus (S&P Global)

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD)$122.374M*$155.821M*$154.872M*
Revenue Actual ($USD)$128.657M $160.524M $147.077M
Primary EPS Consensus Mean ($)-$0.80*-$0.52*-$0.38*
Primary EPS Actual ($)-$0.78*-$0.17*-$0.36*

Values retrieved from S&P Global.*

Regional Sales and KPIs (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025YoY Change
U.S. Sales ($USD Thousands)$100,180 $96,562 -3.6%
Australia & New Zealand ($USD Thousands)$43,938 $46,198 +5.1%
Rest of World ($USD Thousands)$5,785 $4,317 -25.4%
Active Customers (TTM, Millions)4.05 4.07 +0.5%
Average Order Value ($)$81 $78 -3.7%
Number of Orders (Millions)1.84 1.88 +2.2%

Balance Sheet Highlights

MetricDec 31, 2024Sep 30, 2025
Cash & Cash Equivalents ($USD Millions)$24.192 $23.426
Inventory ($USD Millions)$95.750 $96.712
Total Debt ($USD Millions)$111.711 $111.302
Share Count (Basic/Diluted)—10,744,706

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025$608–$612 $598–$602 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$24.5–$27.5 $23.0–$23.5 Lowered
Capital Expenditures ($USD Millions)FY 2025$14–$16 $16–$18 Raised
Weighted Avg Diluted Shares (Millions)FY 202510.8 10.8 Maintained
Gross Margin (%)Q4 2025—56.6%–57.0% New outlook
Modeling items (SBC, D&A, Interest, Tax)FY 2025SBC $8–$10M; D&A $19–$21M; Interest $13–$15M; Tax -25% SBC $8–$9M; D&A $19–$20M; Interest $20–$21M; Tax -10% Updated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain diversificationQ1: Preparing for evolving trade environment . Q2: Diversifying sourcing across countries; received product from new vendors; flexible, short lead times .Transition accelerated; temporary out-of-stocks/newness disruption; inventories improving; confident in updated sourcing .Improving post-transition
Tariffs & pricingQ2: Net ~120 bps gross margin headwind from elevated China tariffs; strategic price increases offset from Q4 onward .Q3 GM benefited from less promo and duty drawback; FY GM guide 57.6%–57.7%; Q4 GM 56.6%–57.0% .Stabilizing
Retail store expansionQ2: 10 stores; strong new customer acquisition; on track to 13 by year-end .12 stores now; opening Bondi store in AU; 8–10 more stores planned in 2026 .Expanding
Wholesale partnershipsQ2: Chainwide Nordstrom rollout for Princess Polly / Petal & Pup; strong results .Continued growth at Nordstrom; ASOS UK performance; Nykaa India, Nuuly, David Jones and Armoire for Petal & Pup .Broadening
AI/technology initiatives—Platform-level AI adoption; Princess Polly launching instant checkout on ChatGPT with Shopify; AI tools across image, copy, CX workflows .Emerging
Streetwear (Culture Kings/mnml)Q2: Test-and-repeat model; margin improvement; strong in-house brands .Continued gross margin/profitability improvement; exclusive collabs (Alpha Industries, Von Dutch) and events .Improving
Regional trendsQ1: U.S. +14.2%, ANZ +6.2% . Q2: U.S. +13.7%, ANZ flat .Q3: U.S. -3.6% on inventory constraints; ANZ +5.1%; Rest of world weak .Mixed

Management Commentary

  • CEO Ciaran Long: “We made meaningful progress on our strategic priorities… successfully refinanced our debt… and advanced the optimization of our sourcing structure… Inventory levels have since improved, and fourth quarter-to-date net sales are tracking up low single digits compared to last year” .
  • CFO Kevin Grant: “We anticipate gross margin in the range of 56.6%–57% for the fourth quarter… We refinanced our credit facility… extending the maturity… to 2028” .
  • CEO on supply chain: “We remain confident that the swift and comprehensive transformation of our sourcing structure has created a more robust and resilient supply chain, setting the stage for sustained growth ahead” .

Q&A Highlights

  • Inventory and AOV: AOV decline tied to out-of-stocks in best-sellers and reduced newness; AOVs “correcting” in Q4 as inventory normalizes .
  • Marketing efficiency: Pulled back spend late Q3 given inventory constraints; ramping spend again with better in-stock levels entering holiday .
  • Store strategy and margins: Brick-and-mortar delivers higher gross margins and strong payback; continued expansion planned in 2026 .
  • Australia outlook: Three consecutive quarters of positive comps; Bondi store opening; expect mid-single-digit growth .
  • Supply chain diversification: Reduced China exposure with multi-region partners; flexibility to move volume across geographies amid macro/tariff changes .

Estimates Context

  • Q3 2025: Revenue missed ($147.1M vs $154.9M consensus*), while SPGI Primary EPS modestly beat (-$0.36 actual vs -$0.38 consensus*) on gross margin strength and reduced promotions despite AOV pressure .*
  • Trajectory: Q1 and Q2 both exceeded revenue consensus and beat EPS consensus*; Q3 miss driven by transitory inventory constraints during sourcing transition .*
  • Revisions risk: FY 2025 guidance cut on net sales and adjusted EBITDA suggests downward estimate revisions for revenue/EBITDA; Q4-to-date positive comps and GM outlook may limit EPS downside near term .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue softness in Q3 was primarily operational and transitory; with inventory now normalized and Q4-to-date comps positive low single digits, near-term recovery is plausible into holiday .
  • Mix shift to stores and disciplined promotions expanded gross margin; Q4 GM guide (56.6%–57.0%) and FY GM guide (57.6%–57.7%) imply structural margin resilience despite tariffs .
  • FY 2025 guidance reset lower on sales and EBITDA; expect consensus revisions to follow, but refinancing to 2028 and lower leverage (3.8x) reduce balance sheet risk and support multi-year execution .
  • Omnichannel strategy (stores, wholesale) and international expansion (ANZ, UK, India) broaden TAM and diversify growth beyond U.S. DTC .
  • AI initiatives (ChatGPT checkout, marketing/content tools) may drive incremental conversion and efficiency; monitor tangible KPI impacts in 2026 .
  • Watch AOV and U.S. demand normalization in Q4; marketing re-acceleration should be margin-aware with regained in-stocks .
  • Near-term catalyst: holiday performance and Q4 GM delivery; medium-term: store rollouts (8–10 in 2026), wholesale scaling, and continued Culture Kings margin improvements .