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AB

A.K.A. BRANDS HOLDING CORP. (AKA)·Q4 2024 Earnings Summary

Executive Summary

  • Net sales grew 6.8% year over year to $159.0M, gross margin expanded 460 bps to 55.9%, and Adjusted EBITDA rose to $6.2M (3.9% margin), with management noting results “ahead of our expectations.” Bold U.S. strength offset ANZ/ROW weakness.
  • U.S. net sales increased 21.6% YoY to $96.1M, while ANZ declined 9.6% and Rest of World fell 13.5%.
  • FY 2025 guidance: net sales $600–$610M and Adjusted EBITDA $27.5–$29.5M; Q1 2025 guidance: net sales $121–$124M and Adjusted EBITDA $1.5–$2.0M; guidance includes the estimated impact of tariffs enacted Feb–Mar 2025.
  • Near-term catalysts: seven Princess Polly U.S. store openings (including SoHo NYC), and expansion of Princess Polly and Petal & Pup to all Nordstrom stores nationwide, supporting brand awareness and customer acquisition.

What Went Well and What Went Wrong

What Went Well

  • U.S. demand remained robust: U.S. net sales +21.6% YoY in Q4; management highlighted continued momentum into Q1 and full-year outlook.
  • Margin execution: gross margin up to 55.9% driven by higher full-price selling and improved inventory position; Adjusted EBITDA margin +300 bps YoY to 3.9%, ahead of expectations.
  • Brand and channel expansion: seven new Princess Polly stores in 2025 and full-fleet Nordstrom rollout for Princess Polly and Petal & Pup; “we will open 7 new Princess Polly stores in 2025… launch across all Nordstrom stores nationwide in the first quarter.”

What Went Wrong

  • International softness: ANZ net sales declined 9.6% YoY and Rest of World fell 13.5% in Q4, offsetting U.S. strength.
  • Higher opex intensity: Marketing rose to 14.0% of sales (from 11.6%), and G&A rose to 15.7% (from 15.0%) partly due to non-routine legal matters and incentive comp.
  • Leverage and cash flow: year-end debt increased to $111.7M (from $93.4M) tied to store investments; FY24 cash from operations fell to $0.7M vs $33.4M in FY23 due to inventory purchases to support U.S. growth.

Financial Results

Income Statement and Profitability (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$148.9 $149.9 $159.0
Gross Margin (%)58.0% 58.0% 55.9%
Net Loss ($USD Millions)$(2.3) $(5.4) $(9.4)
Net Loss per Share ($USD)$(0.22) $(0.51) $(0.88)
Adjusted EBITDA ($USD Millions)$8.0 $8.2 $6.2
Adjusted EBITDA Margin (%)5.0% 5.5% 3.9%

Regional Sales (oldest → newest)

Region ($USD Thousands)Q2 2024Q3 2024Q4 2024
U.S.$95,375 $100,180 $96,106
Australia/New Zealand$45,650 $43,938 $57,225
Rest of World$7,906 $5,785 $5,692
Total$148,931 $149,903 $159,023

KPIs (oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
Active Customers (Millions, TTM)4.01 4.05 4.07
Average Order Value ($USD)$78 $81 $78
Number of Orders (Millions)1.92 1.84 2.04

Balance Sheet and Cash Flow (Selected)

  • Cash and cash equivalents: $24.2M at Q4-end vs $21.9M prior year-end.
  • Inventory: $95.8M at Q4-end vs $91.0M prior year-end.
  • Debt: $111.7M at Q4-end vs $93.4M prior year-end, driven by Princess Polly store investments.
  • Cash flow from operations: $0.7M for FY24 vs $33.4M in FY23 due to inventory purchases to support U.S. growth.

Non-GAAP reconciliation (Q4): Adjusted EBITDA includes add-backs for taxes, D&A, equity-based comp, DC relocation ($1.435M), and non-routine legal matters (~$0.96M).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025N/A$600–$610 New
Adjusted EBITDA ($USD Millions)FY 2025N/A$27.5–$29.5 New
Capital Expenditure ($USD Millions)FY 2025N/A$12–$14 New
Weighted Avg Diluted Shares (Millions)FY 2025N/A10.8 New
Effective Tax Rate (%)FY 2025N/A~(-40%) New
Interest & Other Expense ($USD Millions)FY 2025N/A~$10–$12 New
Depreciation & Amortization ($USD Millions)FY 2025N/A~$18–$20 New
Stock-Based Compensation ($USD Millions)FY 2025N/A~$8–$10 New
Net Sales ($USD Millions)Q1 2025N/A$121–$124 New
Adjusted EBITDA ($USD Millions)Q1 2025N/A$1.5–$2.0 New
Q4 Adjusted EBITDA ($USD Millions)Q4 2024Raised to $6.0–$6.2 (Prelim) $6.216 (Actual) Met upper end

Note: FY25 guidance includes estimated impact of tariffs enacted Feb–Mar 2025.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/technology initiativesFocus on omni-channel/tests; no explicit AI references in releases. “Explore new AI capabilities… personalize journeys, optimize marketing, streamline inventory planning and workflows.” Increasing digital sophistication
Tariffs/macroFY24 outlook noted macro pressures in ANZ. FY25 guidance explicitly contemplates tariffs; ability to take price, vendor mitigation, sourcing diversification. Managed headwind included
Product performanceLoiter triple-digit revenue growth at Culture Kings in Q3. Loiter delivered another quarter of triple-digit growth with faster gross profit growth. Strengthening
Regional trendsU.S. growth double-digit; ANZ pressured. U.S. +21.6% YoY; ANZ -9.6% YoY; ROW -13.5% YoY; early 2025 ANZ comps improving. Mixed: U.S. strong; ANZ improving
Omnichannel expansionPetal & Pup into 40 Nordstrom stores; Princess Polly store openings. All Nordstrom stores carry Princess Polly and Petal & Pup; seven new Princess Polly stores including NYC SoHo. Expanding
Regulatory/legalNon-routine accrual $2.0M in Q3 impacting G&A. Q4 includes non-routine legal items (~$0.96M) in Adjusted EBITDA reconciliation. Ongoing but moderated

Management Commentary

  • “2024 was an exciting and pivotal year… we delivered results ahead of our expectations… $575 million in net sales… 17% U.S. growth… adjusted EBITDA $23.3 million.”
  • “We will open 7 new Princess Polly stores in 2025… first store in New York City slated to open next week… expand across Nordstrom’s entire store fleet this month.”
  • “Harness the power of our flexible technology ecosystem… explore new AI capabilities… personalize customer journeys… optimize marketing… streamline inventory planning and operational workflows.”
  • CFO: “Gross margin expanded 460 basis points to 55.9%… driven by higher penetration of newness and full price selling… adjusted EBITDA of $6.2 million ahead of expectations.”
  • CFO (FY25 modeling): “Adjusted EBITDA $27.5–$29.5 million… effective tax rate of negative 40%… D&A ~$18–$20M; interest & other ~$10–$12M; stock-based comp ~$8–$10M.”

Q&A Highlights

  • U.S. vs. non-U.S. outlook: Management expects double-digit U.S. growth and improving ANZ trends aided by Culture Kings’ test-and-repeat model and new leadership hires.
  • Tariffs and pricing power: Guidance incorporates tariff impacts; management sees capacity to take price on exclusive, weekly newness while pursuing vendor mitigation and sourcing diversification.
  • Gross margin trajectory: FY25 gross margin guided approximately flat YoY with puts/takes from tariffs, lapping promotions in ANZ, seasonal Q4 promotionality, and growing wholesale penetration.
  • Wholesale and stores mix: Long-term mix remains predominantly online; wholesale and brick-and-mortar add brand reach and customer acquisition with favorable economics when brand enhancing.
  • Culture Kings U.S. store expansion: Actively scouting a smaller-format U.S. location maintaining immersive elements; timing to be shared upon site clarity.

Estimates Context

  • Wall Street consensus via S&P Global for Q4 2024 and prior quarters was unavailable at time of writing; therefore, no explicit beat/miss vs. consensus is provided. Analysts may need to revisit FY25 models to reflect flat gross margin assumptions, tariff mitigation, seven new Princess Polly stores, and full-fleet Nordstrom distribution.

Key Takeaways for Investors

  • U.S. momentum remains the core growth engine; Q4 U.S. sales +21.6% YoY underpin FY25 guide despite ANZ/ROW softness.
  • Margin execution credible: 460 bps GM expansion and positive mix from full-price selling; watch wholesale penetration and Q4 seasonality for GM shaping.
  • Guidance embeds tariff headwinds, suggesting resilience through pricing power, sourcing actions, and exclusive product cadence—reducing surprise risk.
  • Omnichannel expansion is a tangible catalyst: seven Princess Polly stores (NYC SoHo opening) and full Nordstrom rollout should accelerate brand awareness and customer acquisition.
  • Culture Kings’ in-house brands (e.g., Loiter) show strong traction under test-and-repeat, indicating improving ANZ comps and potential U.S. store expansion optionality.
  • Balance sheet watch items: debt increased to fund store investments; FY24 operating cash flow dipped as inventory was built to support U.S. growth—monitor inventory turns vs. store ramp.
  • Near-term setup: Q1 guide implies 4–6% growth with EBITDA positive; stock may react to execution on retail openings and wholesale sell-through, and any incremental tariff or FX developments. 
Notes: 
- Non-GAAP metrics are reconciled in the company’s materials; see Q4 reconciliation for adjustments including DC relocation and non-routine legal items. **[1865107_0001865107-25-000015_exhibit991-q42024earningsr.htm:8]**