Summary of a.k.a. Brands Holding Conference Call Company Overview - **Company**: a.k.a. Brands Holding (NYSE: AKA) - **Brands**: Operates a portfolio of consumer fashion brands including Princess Polly, Petal & Pup, Culture Kings, and Minimal [2][4] Key Points and Arguments Brand Performance - **Princess Polly**: Represents about half of the company's sales and has maintained strong consumer engagement despite inventory constraints [4][10] - **Petal & Pup**: Focused on the 25 to 40-year-old demographic, showing strong performance in event and occasion dressing, particularly during Nordstrom promotions [17][18] - **Culture Kings**: Streetwear brand focusing on experiential retail, has improved gross margin and profitability through a test and repeat model [21][22] Marketing and Customer Engagement - **Omnichannel Strategy**: Brands are leveraging multiple marketing channels, including TikTok, to engage customers and drive sales [6][8] - **Physical Retail Expansion**: Opened 11th and 12th stores, with plans for 8 to 10 more in 2026, enhancing customer experience and lifetime value [9][10] - **Wholesale Presence**: Expanding into Nordstrom and ASOS, which is expected to introduce new customers and build brand awareness [14][16] Financial Performance - **Gross Margin**: Achieved a 110 basis points expansion, reaching the highest level in five years, attributed to supply chain diversification and price increases [42][43] - **EBITDA**: Reported at $7 million, with year-to-date cash flow ahead of last year, indicating strong operational performance [46] - **Inventory Management**: Aiming for inventory growth to be lower than sales growth, with improvements in inventory turns expected [49][50] Supply Chain and Operational Challenges - **Supply Chain Transition**: Faced temporary delays in newness and out-of-stock issues, but inventory levels have improved heading into the holiday season [36][40] - **Diversification Efforts**: Focused on diversifying production out of China and negotiating pricing concessions with suppliers [38][39] Future Outlook - **Growth Strategy**: Plans to continue expanding physical stores, enhancing wholesale opportunities, and leveraging AI for operational efficiencies [52][53] - **Leverage Reduction**: Progress in reducing leverage and refinancing credit facilities to support strategic priorities [51] AI and Technology Integration - **AI Adoption**: Implementing AI for image editing, product descriptions, and customer experience workflows, which is expected to enhance creativity and margins over time [33][34] Additional Important Insights - **Cultural Marketing**: Engaging in cultural events (e.g., F1, WWE) to connect with customers and drive brand heat [24][25] - **Customer Engagement**: Noted that physical stores create a social occasion for customers, enhancing brand loyalty and engagement [10][11] This summary encapsulates the key insights from the a.k.a. Brands Holding conference call, highlighting the company's strategic focus on brand performance, marketing, financial health, operational challenges, and future growth opportunities.

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]