Core Insights - a.k.a. Brands reported a quarterly loss of $0.46 per share, slightly worse than the Zacks Consensus Estimate of a loss of $0.44, and a decline from a loss of $0.37 per share a year ago [1] - The company posted revenues of $147.08 million for the quarter, missing the Zacks Consensus Estimate by 4.18% and down from $149.9 million year-over-year [2] - a.k.a. Brands shares have decreased by approximately 35.3% year-to-date, contrasting with the S&P 500's gain of 15.1% [3] Financial Performance - Over the last four quarters, a.k.a. Brands has surpassed consensus EPS estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is -$0.67 on revenues of $165 million, and for the current fiscal year, it is -$2.24 on revenues of $607.7 million [7] Market Outlook - The company's earnings outlook is crucial for assessing future stock performance, with a favorable trend in estimate revisions noted prior to the earnings release [4][6] - The Zacks Rank for a.k.a. Brands is currently 2 (Buy), indicating expectations for the stock to outperform the market in the near future [6] Industry Context - The Retail - Apparel and Shoes industry, to which a.k.a. Brands belongs, is currently ranked in the top 22% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact a.k.a. Brands' performance [5]

Financial Data and Key Metrics Changes - For Q3 2025, net sales were $147 million, a 2% decline year over year, but an increase of 4.4% on a two-year stack [6][18] - Adjusted EBITDA for the quarter was $7 million, with year-to-date adjusted EBITDA exceeding $17 million [6][7] - Gross margin expanded by 100 basis points to 59.1%, driven by a higher mix of in-store sales and less promotional activity [19][20] - Year-to-date net sales increased by 5% compared to the previous year [6][25] Business Line Data and Key Metrics Changes - Princess Polly, the largest brand, saw mid-single-digit traffic growth and strong demand despite temporary inventory headwinds [9][10] - Petal & Pop performed well in direct-to-consumer channels, with a successful fall promotion leading to a triple-digit percentage increase in demand [12][13] - Culture Kings and Minimal showed improvement in gross margin and profitability, with continued growth in net sales and gross profit dollars year over year [14][15] Market Data and Key Metrics Changes - U.S. net sales declined by 3.6% to $97 million due to supply chain disruptions [18][19] - Australian sales increased by 5.1% to $46 million, reflecting strong performance in that market [18][19] - Total orders for Q3 were 1.9 million, a 2.2% increase compared to the previous year [19] Company Strategy and Development Direction - The company is focused on diversifying its supply chain and optimizing operations to build long-term flexibility and resilience [4][6] - Plans to expand physical retail presence and select wholesale partnerships to enhance brand awareness [8][11] - The company aims to balance growth and profitability while maintaining high product quality standards [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improved inventory levels and supply chain as they head into the holiday season [5][22] - The company anticipates net sales for the full year to be between $598 million and $602 million, representing growth in the 4%-5% range [23][24] - Management noted that the transformation of the sourcing ecosystem has created a more robust supply chain for sustained growth [6][18] Other Important Information - The company successfully refinanced its debt, extending the maturity by two years and improving financial stability [22] - Inventory at the end of Q3 was $96.7 million, down 8.8% compared to the previous year, with expectations for inventory to normalize by year-end [22][24] Q&A Session Summary Question: Clarification on updated guidance and inventory impact - Management confirmed that inventory levels have improved and they are seeing positive comps in Q4, with low single-digit growth expected [26][27] Question: Impact of lower average order value (AOV) - The decline in AOV was attributed to out-of-stocks and lack of new products, but management expects AOV to recover as inventory stabilizes [28][29] Question: Store strategy and margin implications - Management highlighted the positive performance of Princess Polly stores and the expectation of continued gross margin improvements as retail presence expands [30][31] Question: Marketing ROI trends - Marketing spend was adjusted due to inventory constraints, but management plans to ramp up marketing as inventory levels normalize [32] Question: Future inventory levels and Australian market potential - Management expects inventory to be flat year over year by the end of the year, with Australia continuing to be a growth driver [33][34] Question: Supply chain diversification progress - Management reported significant progress in diversifying the supply chain beyond China, enhancing flexibility and resilience [35][36]

Customer Metrics - Active customers increased to 4.07 million for the three months ended September 30, 2025, compared to 4.05 million in the same period of 2024[95]. - For the nine months ended September 30, 2025, net sales increased by $20.6 million, or 5%, driven by a 6% increase in the number of processed orders[124]. Financial Performance - Net loss for the three months ended September 30, 2025, was $4.96 million, a slight improvement from a net loss of $5.44 million in the same period of 2024[99]. - Adjusted EBITDA for the three months ended September 30, 2025, was $7.02 million, compared to $8.21 million in the same period of 2024[99]. - Gross profit for the nine months ended September 30, 2025, was $238.6 million, an increase of $14.4 million or 6% compared to 2024, driven by a 5% increase in net sales[126]. - The net loss for the three months ended September 30, 2025, was $4.960 million, compared to a net loss of $5.439 million in 2024[115]. Sales and Margins - Average order value decreased to $78 for the three months ended September 30, 2025, from $81 in the same period of 2024[95]. - Gross margin improved to 59% for the three months ended September 30, 2025, compared to 58% in the same period of 2024[99]. - Net sales for the three months ended September 30, 2025, decreased by $2.8 million, or 2%, compared to the same period in 2024, primarily due to a 4% decrease in average order value[116]. - Gross profit remained flat at $86.983 million for the three months ended September 30, 2025, with gross margin increasing to 59% from 58% in 2024[118]. Expenses - Selling expenses increased by $1.3 million, or 3%, for the three months ended September 30, 2025, attributed to the opening of additional stores[119]. - Marketing expenses decreased by $0.8 million, or 4%, for the three months ended September 30, 2025, remaining flat as a percentage of net sales at 13%[120]. - General and administrative expenses decreased by $1.1 million, or 4%, for the three months ended September 30, 2025, primarily due to a reduction in non-routine legal expenses[121]. - Selling expenses rose by $9.5 million or 8% to $126.8 million, representing 29% of net sales, attributed to the opening of additional stores[127]. - Marketing expenses increased by $1.2 million or 2% to $53.6 million, accounting for 12% of net sales[128]. - General and administrative expenses grew by $3.5 million or 5% to $79.9 million, remaining flat at 18% of net sales[129]. Cash Flow and Investments - Free Cash Flow increased to $2.41 million for the nine months ended September 30, 2025, compared to a negative $14.03 million in the same period of 2024[104]. - Net cash provided by operating activities increased by $21.1 million for the nine months ended September 30, 2025, compared to the same period in 2024[105]. - Net cash provided by operating activities was $14.7 million, a significant increase of $21.1 million compared to a net cash used of $6.3 million in 2024[141][143]. - Net cash used in investing activities increased by $4.6 million to $12.3 million, primarily due to capital expenditures for new store openings[145]. - Net cash used in financing activities rose by $19.5 million to $3.3 million, mainly due to additional repayments under the senior secured credit facility[147]. Strategic Initiatives - The company plans to continue investing in performance marketing and brand awareness to drive future growth[108]. - The company plans to continue investing in operations, including headcount and logistics, to support growth and improve customer experience[112]. - The company is exploring sourcing products from suppliers outside of China to mitigate tariff impacts, which may affect gross margins and product quality[107]. Economic Environment - The macroeconomic environment, including inflation and tariffs, poses risks that could negatively impact consumer spending and operational results[107]. Goodwill and Accounting - As of June 30, 2025, the estimated fair value of the mnml reporting unit exceeded its carrying value by 4.6%, with the carrying value of related goodwill at $30.0 million[150]. - A 60 basis points increase in the selected discount rate would result in impairment for the mnml reporting unit[150]. - No goodwill impairment was required during the three or nine months ended September 30, 2025[150]. - There have been no significant changes in critical accounting estimates from those reported in the 2024 Form 10-K[151].

Financial Performance - Net sales for Q3 2025 decreased by 1.9% to $147.1 million, compared to $149.9 million in Q3 2024, and down 2.7% on a constant currency basis [5]. - Adjusted EBITDA for Q3 2025 was $7.0 million, or 4.8% of net sales, compared to $8.2 million, or 5.5% of net sales in Q3 2024 [6]. - The net loss for Q3 2025 was $(5.0) million, or $(0.46) per share, compared to a net loss of $(5.4) million, or $(0.51) per share in Q3 2024 [5]. - Net loss for the nine months ended September 30, 2025, was $16,935 million, slightly higher than the net loss of $16,633 million for the same period in 2024 [23]. - Adjusted EBITDA for the three months ended September 30, 2025, was $7,022 million, compared to $8,208 million in 2024, reflecting a decrease of 14.5% [24]. Margins and Expenses - Gross margin improved to 59.1% in Q3 2025, up from 58.0% in Q3 2024, primarily due to a higher mix of retail stores and less promotional activity [6]. - Selling expenses increased to $43.2 million, or 29.4% of net sales, compared to $41.9 million, or 27.9% of net sales in Q3 2024 [6]. - Marketing expenses decreased to $18.5 million, or 12.6% of net sales, compared to $19.3 million, or 12.9% of net sales in Q3 2024 [6]. - Gross margin improved to 59.1% for the three months ended September 30, 2025, compared to 58.0% in 2024 [24]. Sales and Customer Metrics - Active customers increased to 4.07 million for the three months ended September 30, 2025, a 0.5% increase from 4.05 million in 2024 [25]. - Average order value (AOV) decreased to $78 for the three months ended September 30, 2025, down 3.7% from $81 in 2024 [25]. - Total sales for the three months ended September 30, 2025, were $147,077 million, a decrease of 1.9% compared to $149,903 million in 2024 [25]. - U.S. sales for the three months ended September 30, 2025, were $96,562 million, down 3.6% from $100,180 million in 2024 [25]. Outlook and Cash Position - The updated full-year 2025 net sales outlook is $598 - $602 million, down from the prior outlook of $608 - $612 million [8]. - Cash and cash equivalents at the end of Q3 2025 totaled $23.4 million, down from $24.2 million at the end of fiscal year 2024 [12]. - Cash and cash equivalents at the end of the period were $23,426 million, compared to $24,192 million at the end of 2024 [21]. - Total current liabilities increased to $107,626 million as of September 30, 2025, from $97,038 million at the end of 2024, an increase of 10.5% [21]. Inventory and Assets - Inventory at the end of Q3 2025 was $96.7 million, compared to $106.0 million at the end of Q3 2024 [12]. - Total assets increased to $411,327 million as of September 30, 2025, up from $385,204 million on December 31, 2024, representing a growth of 6.0% [21]. - The company opened its 11th Princess Polly store during the quarter and expanded wholesale partnerships [2].

Core Viewpoint - Shares of a.k.a. Brands (AKA) have increased by 40.6% in the past four weeks, closing at $13.81, with a mean price target of $20.5 indicating a potential upside of 48.4% [1] Price Targets - The average price target consists of four estimates ranging from a low of $9.00 to a high of $30.00, with a standard deviation of $11.09, indicating variability among analysts [2] - The lowest estimate suggests a decline of 34.8%, while the highest indicates a potential upside of 117.2% [2] Analyst Consensus and Earnings Estimates - Analysts are optimistic about AKA's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which historically correlate with stock price movements [4][11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 4.8%, with one estimate moving higher and no negative revisions [12] Zacks Rank - AKA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, suggesting a strong potential upside [13] Caution on Price Targets - While price targets are a common metric, relying solely on them for investment decisions may not be prudent due to the questionable ability of analysts to set accurate targets [3][10] - Analysts often set optimistic price targets influenced by business relationships, which can lead to inflated estimates [8]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than the traditional "buying low and selling high" approach, aiming for quicker profits [1] Group 1: Momentum Investing Characteristics - Fast-moving trending stocks can be difficult to enter at the right time, as they may lose momentum if future growth does not justify their high valuations [2] - A safer strategy involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Stock Analysis - a.k.a. Brands (AKA) - a.k.a. Brands has shown a price increase of 24.5% over the past four weeks, indicating growing investor interest [4] - The stock has gained 14.4% over the past 12 weeks, with a beta of 1.6, suggesting it moves 60% more than the market [5] - AKA has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] Group 3: Earnings and Valuation - An upward trend in earnings estimate revisions has led to a Zacks Rank 2 (Buy) for AKA, as analysts raising estimates attract more investor interest [7] - AKA is trading at a Price-to-Sales ratio of 0.23, meaning investors pay 23 cents for each dollar of sales, indicating a reasonable valuation [7] Group 4: Additional Opportunities - Besides AKA, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, suggesting further investment opportunities [8] - Various Zacks Premium Screens are available to help identify winning stock picks based on different investing styles [9]

Core Insights - The market may be undervaluing the investment opportunity presented by a.k.a. Brands (NYSE: AKA) [1] Group 1 - The article highlights that the author has a long position in a.k.a. Brands, indicating confidence in the company's future performance [1]

Group 1: Kingdom Capital Advisors Performance - Kingdom Capital Advisors' portfolio recovered significantly in Q3 2025, achieving a return of 20.78% (net of fees), outperforming the Russell 2000 TR (12.39%), S&P 500 TR (8.12%), and NASDAQ 100 TR (9.01%) [1] - Since inception, the portfolio compounded at 21.06% (net of fees), compared to 4.60% for the Russell 2000 TR, 11.46% for the S&P 500 TR, and 13.48% for the NASDAQ 100 TR [1] Group 2: A.k.a. Brands Holding Corp. Overview - A.k.a. Brands Holding Corp. (NYSE:AKA) is a portfolio of online fashion brands, with a one-month return of -3.76% and a 52-week loss of 57.24% [2] - As of October 13, 2025, A.k.a. Brands Holding Corp. stock closed at $10.43 per share, with a market capitalization of $113.13 million [2] Group 3: A.k.a. Brands Holding Corp. Insights - Despite strong sales growth, A.k.a. Brands Holding Corp.'s stock price remains stagnant, with management outperforming targets and a significant alignment of incentives to increase stock price from $10 to over $100 [3] - The company is moving most of its supply chain out of China due to new tariffs, indicating strategic adjustments in response to market conditions [3] Group 4: Hedge Fund Interest and Comparisons - A.k.a. Brands Holding Corp. is not among the 30 most popular stocks among hedge funds, with only one hedge fund holding its stock at the end of Q2 2025 [4] - While acknowledging A.k.a. Brands Holding Corp.'s potential, the company believes certain AI stocks present greater upside potential and less downside risk [4]

Group 1 - Shares of a.k.a. Brands (AKA) have increased by 1.4% over the past four weeks, closing at $10.15, with a mean price target of $20.5 indicating a potential upside of 102% [1] - The average price targets range from a low of $9.00 to a high of $30.00, with a standard deviation of $11.09, suggesting variability in analyst estimates [2] - Analysts have shown a strong agreement in revising earnings estimates higher, which correlates with potential stock price increases [4][11] Group 2 - The Zacks Consensus Estimate for the current year has risen by 5.5% over the last 30 days, indicating positive sentiment among analysts [12] - AKA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] - While consensus price targets may not be entirely reliable, the direction they imply appears to be a good guide for potential price movement [14]

Summary of AKA Brands Holding (AKA) Conference Call Company Overview - AKA Brands is a portfolio of brands targeting the next generation of consumers through an omnichannel approach, primarily focusing on direct-to-consumer and expanding into stores and wholesale [2][3] - The company operates four main brands: Princess Polly, Petal and Pop, Culture Kings, and Minimal, with Princess Polly being the largest, accounting for about 50% of the overall portfolio [4][5] Core Business Strategies - **Data-Driven Merchandising**: The company employs a "test and repeat" model, introducing approximately 100 new styles weekly, with initial low inventory risk [15][16] - **Influencer Marketing**: Emphasis on working with smaller, more authentic influencers rather than mega influencers, which is seen as more economical and effective [17][18] - **Omnichannel Expansion**: The company is expanding its physical presence, having opened 11 stores for Princess Polly in the U.S. and planning to open 8 to 10 more in the next year [26][29][30] Brand Performance - **Princess Polly**: Focused on the teenage and college demographic, has seen significant growth in the U.S. and internationally, with successful store openings [6][27] - **Petal and Pop**: Targeting a slightly older female demographic, has successfully entered Nordstrom stores and is expanding its wholesale presence [8][32] - **Culture Kings**: A streetwear brand that combines sports, music, and fashion, has opened a flagship store in Las Vegas, which serves as a marketing and sales hub [11][12][13] - **Minimal**: Focused on runway-inspired streetwear for men, leveraging athlete endorsements for marketing [14] Financial Performance - The company reported a 9.5% growth on a constant currency basis and a 14% increase in the U.S. market [37] - Projected sales for the year are between $600 million to $612 million, with EBITDA expected to be between $24.5 million to $27.5 million [38] Challenges and Mitigation Strategies - **Earnings Per Share (EPS) Concerns**: The decline in EPS is attributed to amortization from acquisitions and tariffs affecting performance [41][42] - **Sourcing and Tariff Mitigation**: The company is diversifying its supply chain away from China, seeking dual sourcing options, and has implemented pricing actions to offset tariff impacts [43][44][45] Long-Term Growth Opportunities - The company sees significant growth potential in the U.S. market and is exploring international expansion and acquisition opportunities to accelerate brand growth [35][36] Key Metrics - Approximately 30% of new customers are being introduced through physical stores [26][28] - The company aims for a payback period of two years or less for new store investments [31]