A.k.a. Brands (AKA 0.93%), a portfolio company behind digital and omnichannel fashion brands, reported results for Q2 2025 on August 6, 2025. The headline news from the release was stronger-than-expected GAAP revenue of $160.5 million for Q2 2025, ahead of the $155.8 million GAAP analyst estimate, and a GAAP loss per share of $(0.34), also less than the anticipated loss of $(0.505). Revenue grew 7.8% compared to the same period last year. While the net loss (GAAP) widened year over year to $(3.6) million, t ...

Core Insights - The article discusses the strategic transformation of Three Squirrels as it aims to return to a revenue scale of over 10 billion yuan in 2024, with a focus on full-category and full-channel expansion [2][3] - The CEO, Zhang Liaoyuan, describes 2025 as a "year of rebirth" for the company, emphasizing the need for brands to navigate the challenges of diminishing traffic dividends and intensified competition [2][3] Strategic Transformation - Three Squirrels has submitted an application for a dual listing on the Hong Kong Stock Exchange, marking a shift from an e-commerce model to a "manufacturing-oriented private brand retailer" [3] - The company aims to create a "super supply chain" that integrates manufacturing, branding, and retail, thereby shortening the delivery chain and providing consumers with high-quality and affordable products [3][4] Market Position and Financial Performance - In 2024, Three Squirrels reported a revenue of 10.622 billion yuan, a year-on-year increase of 49.3%, and a net profit of 408 million yuan, up 85.51% [3] - The company anticipates that 2025 will be a pivotal year for many traditional brands, with a shift in competition from price to innovation [4] Channel and Product Expansion - Three Squirrels is expanding its product offerings to include various sub-brands such as pet food, pre-packaged meals, and beverages, with plans to launch 33 sub-brands [7] - The company is also focusing on offline sales, which accounted for 30% of total revenue in 2024, with a significant increase in offline distribution revenue [9][10] Challenges and Opportunities - The company faces challenges in diversifying its product categories while maintaining brand recognition, as consumers may associate the brand primarily with nuts [7][8] - The offline market presents a significant growth opportunity, with Three Squirrels aiming to double its offline distribution by 2025 [9][10] Future Plans - Three Squirrels plans to open 20 new stores for its all-category lifestyle brand by 2025, indicating a shift in its offline store strategy [11] - The company is also exploring partnerships and acquisitions to enhance its market presence and operational efficiency [5][10]

Financial Data and Key Metrics Changes - The company reported a net sales increase of approximately 12% on a constant currency basis to $129 million, marking the fourth consecutive quarter of growth [7][30] - Adjusted EBITDA for the first quarter was $2.7 million, a significant increase from $900,000 in the same period last year, with an adjusted EBITDA margin of 2.1% compared to 0.7% [9][33] - Gross margin expanded by 100 basis points to 57.2% compared to 56.2% in the same period last year, driven by higher full-price selling and improved inventory position [31][33] Business Line Data and Key Metrics Changes - The U.S. business grew by 14.2% year over year, while Australia and New Zealand saw a revenue growth of 6.2% [30][31] - The active customer base increased by 7.8% year over year, reaching 4.13 million by the end of the first quarter [30] - Princess Polly, the largest brand, continues to perform strongly, with double-digit revenue growth driven by trend-forward styles and successful marketing campaigns [15][16] Market Data and Key Metrics Changes - The company experienced a 9.2% increase in total orders for the first quarter, indicating strong customer demand [30] - The omnichannel expansion is on track, with Princess Polly opening its seventh store in SoHo, which was the strongest opening to date [8][15] - The company is diversifying its supply chain, anticipating minimal exposure to China by the fourth quarter, with production shifting to countries like Vietnam and Turkey [10][12] Company Strategy and Development Direction - The company laid out three key priorities for 2025: attracting and retaining customers through direct-to-consumer channels, expanding brand awareness through physical retail investments, and streamlining operations [14][15] - The strategic focus includes leveraging a test and repeat model for inventory management and enhancing customer connections through innovative marketing [9][14] - The company aims to build a robust supply chain to mitigate tariff impacts and enhance long-term competitiveness [10][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macro environment and believes the impact of tariffs will be transitory [28][36] - The company anticipates continued solid demand trends in the second quarter, with net sales expected to be between $154 million and $158 million [36][38] - Management remains focused on building durable and resilient fashion brands while delivering value to stakeholders [39] Other Important Information - The company ended the first quarter with $26.7 million in cash and cash equivalents, an increase from $24.2 million a year ago [34] - Inventory at the end of the quarter was $94.4 million, a 3% increase compared to the previous year, which is below the 10% net sales growth [35] - The company has a stock buyback program with approximately $1.1 million remaining in authorization [35] Q&A Session Summary Question: Can you provide insights on guidance for revenues and adjusted EBITDA, particularly regarding tariffs? - Management discussed their approach to tariffs, emphasizing a diversified supply chain and selective pricing actions to mitigate impacts [41][43][44] Question: Will the company be completely out of China by the fourth quarter? - Management confirmed that they expect to be predominantly out of China by Q4, while maintaining some relationships for servicing other regions [51][52] Question: What are the demand trends expected for the second half of the year? - Management indicated positive growth in Australia and continued strong performance in the U.S., with expectations for growth to resume in Q3 [53][55] Question: How sustainable is the growth in the U.S. business? - Management expressed confidence in the sustainability of growth, supported by strong customer metrics and new store openings [60][62] Question: What are the long-term plans for store openings and wholesale partnerships? - Management highlighted the success of new stores in driving customer acquisition and expressed optimism about expanding wholesale partnerships, particularly with Dillard's [70][74]

Group 1 - The core viewpoint of the report is that the company maintains its net profit forecasts for 2025 and 2026 at 1.41 billion and 1.71 billion HKD respectively, with a current stock price corresponding to 25.1 and 20.4 times the P/E ratio for those years [1] - The company announced a placement plan to issue 80 million shares at a price of 14.72 HKD per share, which represents approximately 3.40% of the total shares outstanding as of the announcement date [2] - The total proceeds from the placement are expected to be around 1.1776 billion HKD, with net proceeds estimated at approximately 1.167 billion HKD after deducting commissions and estimated expenses [2] Group 2 - The company plans to use about 50% of the proceeds to expand and upgrade its production facilities and supply chain, 20% to further develop its sales and distribution network, 20% for brand building, and 10% for other general corporate purposes [2] - The company is expected to maintain a rapid revenue growth trend through multi-channel expansion and product diversification, including new packaging and flavors [3] - Although the company may face some pressure on gross margin due to rising prices of konjac powder and channel structure impacts, overall net profit margin is expected to remain stable due to efficiency improvements and revenue growth [3]