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]

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]