Financial Data and Key Metrics Changes - Net sales increased approximately 9.5% on a constant currency basis to $160.5 million, marking the fifth consecutive quarter of growth [6][26] - Adjusted EBITDA was $7.5 million, in line with expectations, compared to $8 million in the same period last year [8][32] - Gross margin declined 20 basis points to 57.5%, slightly ahead of expectations, impacted by elevated tariffs [28][29] - Active customer count rose to 4.13 million, a 3% increase year over year [27] Business Line Data and Key Metrics Changes - U.S. net sales grew 14% to $108 million, driven by successful merchandising and marketing initiatives [6][26] - Australia region's net sales were flat at $45.7 million, ahead of expectations due to improved margins [6][26] - Princess Polly, the largest brand, accounted for approximately half of total revenue, with strong performance in dresses and omnichannel strategy [13][16] Market Data and Key Metrics Changes - Active customers grew 3% on a trailing twelve-month basis, with global orders increasing by 7% [7] - Princess Polly's TikTok shop revenue increased by 60% year over year, indicating strong engagement on social media platforms [14] - Culture Kings in Australia saw double-digit revenue growth in the second quarter, reflecting successful turnaround efforts [22] Company Strategy and Development Direction - The company is focused on expanding its direct-to-consumer channels and enhancing brand awareness through physical retail growth and wholesale partnerships [12][17] - Plans to open 8 to 10 new Princess Polly stores in 2026, continuing to leverage data for optimal locations [7][43] - Emphasis on diversifying the supply chain to mitigate tariff impacts and enhance operational flexibility [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the macro environment and highlighted the resilience of the business model despite tariff challenges [24][25] - The company anticipates that sourcing diversification and strategic price increases will offset tariff impacts in Q4 and beyond [11][35] - Positive outlook for the second half of the year, with expectations for net sales growth between 5% to 7% [35] Other Important Information - The company ended the quarter with $23.1 million in cash and cash equivalents, down from $25.5 million a year ago [33] - Inventory levels decreased by 13% year over year, indicating improved inventory management [33] - The company is committed to long-term brand building and sustainable fashion practices, as evidenced by Princess Polly's B Corp certification [15] Q&A Session Summary Question: Thoughts on distribution model between DTC, e-commerce, and wholesale - Management highlighted the success of the omnichannel strategy, with strong growth in U.S. sales and positive customer reactions in stores [40][42] Question: Long-term sourcing structure approach - Management discussed the shift from predominantly sourcing in China to diversifying supply chains, enhancing flexibility and resilience [44][46] Question: Gross margin dynamics in the third quarter - Management confirmed a similar 120 basis point headwind from tariffs in Q3, but expected slight gross margin expansion due to improved inventory management [53][54] Question: Active customer growth and order frequency - Management attributed growth in active customers to effective engagement strategies and the test and repeat merchandising model [56][58] Question: Inventory position ahead of the holiday season - Management expressed confidence in inventory levels returning to desired positions by the holiday season, despite a lighter inventory at the end of Q2 [72][74] Question: Breakdown of U.S. business growth - Management noted strong demand across channels, with positive results from Nordstrom partnerships and retail store performance [79][80] Question: Pricing strategy across different channels - Management indicated successful pricing actions taken across brands, allowing for offsetting tariff impacts and maintaining gross margins [82][84] Question: Opportunities beyond Nordstrom for wholesale - Management acknowledged potential for expanding wholesale partnerships, particularly for Petal and Pup, while focusing on direct-to-consumer for Princess Polly [85][86]

Summary of AKA Brands Conference Call Company Overview - **Company**: AKA Brands - **Brands**: Princess Polly, Petal and Pup, Culture Kings, Minimal - **Target Audience**: Next generation consumers, primarily Gen Z and Millennials, who seek fashion inspiration on social media and shop online [1][2] Core Competencies and Differentiation - **Exclusive Products**: All products are exclusive to AKA's brands, allowing for a test and repeat merchandising model that introduces new styles weekly [3][4] - **Marketing Strategy**: Focus on influencer-led marketing, particularly with smaller, authentic influencers rather than mega influencers [4] - **Brand Positioning**: - **Princess Polly**: Targets teens and college consumers with on-trend fashion at accessible prices [4] - **Petal and Pup**: Caters to a slightly older demographic (25-40 years) with elevated styles [4] - **Culture Kings**: Combines sports, music, and fashion, with a mix of first-party and exclusive third-party products [5] Market Expansion and Performance - **US Market Growth**: The US market is 17 times larger than Australia, with 70% of AKA's business now in the US. US sales grew 14% last quarter, marking the sixth consecutive quarter of growth [8][11] - **Store Openings**: Eight stores for Princess Polly are currently open, with plans to reach 13 by year-end. Stores are seen as effective for introducing new customers, with 30% of in-store customers being new to the brand [21][22] Consumer Trends and Insights - **Consumer Engagement**: Active customer count grew 8% year-over-year, with over 4 million active customers. Customers engage daily with new styles introduced weekly [26][31] - **Wholesale Partnerships**: Successful partnership with Nordstrom, with 95% of customers being new to the brands. Petal and Pup is seeing category expansion opportunities through this channel [15][16][18] Marketing and Customer Acquisition - **Marketing Spend**: Approximately 12% of sales are spent on marketing, focusing on influencer marketing and evolving content across various platforms [35][37] - **Customer Acquisition Strategy**: Focus on expanding the customer base through diverse marketing channels, including TikTok and Pinterest [27][28] Financial Performance and Projections - **Profitability**: All brands are profitable and generate cash. The company aims for low teens EBITDA margins as it scales [54][56] - **Dynamic Environment**: The company is prepared for a dynamic market environment, leveraging short lead times for product flexibility [39][42] Challenges and Opportunities - **Tariff Impact**: The company is actively working to mitigate tariff impacts by diversifying its supply chain away from China and negotiating discounts with vendors [42][43] - **Growth in Australia**: Australia has returned to growth with a 6% increase in Q1, driven by improved performance of women's brands and the Culture Kings model [44][45] Long-term Outlook - **Growth Potential**: Significant growth opportunities in the US market across online, wholesale, and store channels. The test and repeat model is expected to reduce merchandising risk and enhance gross margins [57][59] - **Future Strategy**: Continued investment in marketing and store openings, with a focus on being where customers are, whether online or in physical locations [22][60]