a.k.a. Brands Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 6, 2025

There are 7 speakers on the call.

Operator

Greetings, and welcome to AKA Brands Holdings Corporation Fourth Quarter and Fiscal twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this call is being recorded. It is now my pleasure to introduce Emily Schwartz.

Operator

Thank you. You may begin.

Speaker 1

Good afternoon. Thank you for joining AKA Brands to discuss our fourth quarter and fiscal twenty twenty four results released this afternoon, which can be found on our website at ir.akabrands.com. With me on the call today are Turan Long, Chief Executive Officer and Kevin Grant, Chief Financial Officer. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions.

Speaker 1

Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward looking statements. This call will also contain non GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non GAAP measures to the most comparable net GAAP measures are included in the release, furnished to the SEC and available on our website.

Speaker 1

With that, I'll turn the call over to Kieran.

Speaker 2

Good afternoon, everyone, and thanks for joining us. This marks my first call as the permanent CEO, and I'm thrilled to build on the foundation we've established over the past few years and need AKA brands through this next chapter of growth. I'd also like to introduce Kevin Grant, our Chief Financial Officer, who was appointed to the role in the first week of January. Prior to becoming the CFO, Kevin was the company's Controller and a key senior leader at AKA Brands since April 2021. Kevin joined AKA from Walmart where he spent seven years in senior finance positions and prior to that he spent eleven years at Ernst and Young.

Speaker 2

I'm excited to have him on the call today. 2024 was an exciting and pivotal year for AKA Brands, marking a fundamental shift in our trajectory. I'm particularly proud that we delivered results ahead of our expectations, which is a testament to our team's ability to execute at the highest levels. Thank you to our team for their hard work and dedication building next generation fashion brands as well as their consistent innovation and enthusiasm towards serving our customers. Before I go through the results, I'd like to highlight some key achievements from the past year.

Speaker 2

In 2024, we achieved a significant milestone by stabilizing the business and returning to growth. We delivered $575,000,000 in net sales, representing a 5.2% increase over the prior year. In The U. S, which is our largest market, we delivered an impressive 17% net sales growth, underscoring the strength of our brands and the long runway of opportunity ahead in the region. We successfully attracted new customers while strengthening our bond with existing ones, resulting in an impressive 9% growth in our trailing twelve month active customer base, surpassing 4,000,000 customers.

Speaker 2

We expanded our omni channel initiative to drive profitable growth and enhance brand awareness. We opened five Princess Polly stores throughout California, Arizona and Boston, and our women's brands furthered their wholesale tests with leading retailers such as Nordstrom. We enhanced our assortment with fresh, high quality merchandise, resulting in stronger full price sales and a 200 basis point improvement in gross margin to 57%. And lastly, given the strength and flexibility of our business model, we delivered $23,300,000 of adjusted EBITDA, which represented significant year over year growth of 69%. Our strong financial performance and ability to execute our strategy gives me great confidence in AKA Brands' many profitable growth opportunities ahead.

Speaker 2

As we look at 2025, we are steadfast in our focus on growing our brands and enhancing our overall profitability. Our momentum continues with the quarter to date net sales growth consistent with our Q1 outlook of 4% to 6%. We're confident in our full year sales outlook of $600,000,000 to $610,000,000 representing growth of 5% at the midpoint and adjusted EBITDA of $27,500,000 to $29,500,000 for the year. Building on the success of last year, we remain focused on three key priorities. First, we will attract and retain customers through our direct to consumer channels.

Speaker 2

Our brands are early on in their journey and we believe we have significant opportunity to grow awareness of our brands. This includes the evolution of our test and repeat merchandising model and delivering on our promise of curating new, on trend, exclusive fashion to customers weekly. We'll also leverage differentiated and innovative strategies across multiple marketing platforms to deepen our direct connection with customers. Second, building upon our early success, we will expand our reach and total addressable market through physical retail and growing our wholesale partnerships. As you saw in our press release this afternoon, we will open seven new Princess Polly stores in twenty twenty five with our first store in New York City slated to open next week.

Speaker 2

We're also expanding our wholesale presence. Princess Polly and Petal and Puff will launch across Nordstrom's entire store fleet this month. And third, we remain committed to streamlining our operations and strengthening our financial foundation. As part of this, we will continue to harness the power of our flexible technology ecosystem, which allows us to explore new AI capabilities to deliver great customer experience and drive operational excellence with minimal capital investment and resources. In combination with our comprehensive set of customer data, we will leverage AI driven solutions to personalize customer journeys, predict shopping behaviors, optimize marketing, streamline inventory planning and operational workflows.

Speaker 2

Now, let me share some recent highlights from our brands as well as growth drivers for 2025. Starting with Princess Polly, our largest brand that's well known for its trend driven designs and authentic connection with its customers, Princess Polly has climbed in popularity in The U. S. Over the past several years as an online only brand. And I'm pleased that the brand continues to resonate with its customers through innovative merchandising and marketing strategies.

Speaker 2

Anchored on our data driven test and repeat merchandising models, Princess Polly consistently drops new collections and styles to stay ahead of the trends and capitalize on big moments, such as upcoming festival, prom and graduation collections, and then an exclusive edit with Ashton Earle, which launched earlier this week. Core to the Princess Polly brand is its next generation marketing approach, which blends traditional and cutting edge marketing initiatives to foster deep connection with its customer. In 2025, as part of our strategy to attract and retain customers, Princess Polly will lead with its influencer strategy on social media, while also diversifying to over 30 different marketing platforms, including WeChat, Netflix and out of home billboards to build upon the momentum and brand affinity. Though Princess Polly remains primarily digital first fashion brands, the brand is expanding its footprint to remain at the forefront of the next generation of retail. In September of twenty twenty three, Princess Polly took a significant step by launching the brand into physical retail with its first store in Los Angeles.

Speaker 2

The in store customer response exceeded our expectation, validated our omni channel vision and led Princess Polly to opening five more stores in 2024. The stores drive revenue and profitability. However, their strategic value lies in expanding brand awareness, acquiring the customers and creating deeper, more meaningful connections with our existing customers through enhanced touch points and physical experiences. More than 30% of customers shopping in our stores are new to Princess Polly on their first visit. And importantly, while it's still early days, we've observed an incremental lift in our online business in the surrounding radius when a store opens, confirming our thesis that we're expanding our market share with each new location.

Speaker 2

We are excited to announce that we will be opening our latest physical expression of the Princess Polly brand in Seoul, New York City next week. The opening will be supported by an engaging series of launch celebrations featuring in store grand opening events and citywide activations. We encourage those of you in New York to come out and experience the brand firsthand. Building on the store momentum, I'm excited to announce that Princess Polly will open seven new stores across The U. S.

Speaker 2

In 2025, which would bring the total number of stores to 13 by year end. In addition to New York City, Princess Poly will unveil stores in top shopping destinations across the country, including New York, Florida, California, Ohio and Pennsylvania. From a timing perspective, four stores will open in the first half of the year with the remaining stores slated to open in the back half. Building upon its omni channel model, Princess Polly is also expanding its reach through strategic partnerships with leading retailers. Following a highly successful pilot across 20 Nordstrom locations in the fourth quarter, Princess Polly will launch new styles across all Nordstrom stores nationwide in the first quarter, further validating that broader consumer exposure consistently drives strong demand for our brands.

Speaker 2

Princess Polly also recently launched over 70 styles on asos.com in The UK, establishing the groundwork for future global expansion. Petal and Pup, our other women's brand, appeals to females in their 20s and 30s with its stylish feminine designs that make fashion accessible and empowering for life's biggest moments. Building on its digital foundations, Pedal and Pop is also strategically expanding into new channels, driving brand awareness while achieving strong performance across all partnership launches. As we announced in January, Petal and Pop had a very successful test across Nordstrom's website and half of their store fleet in 2024 and will now be featured in all Nordstrom stores later this month. In addition to its omni channel expansion, Petal and Pop continues driving customer engagement through multi channel marketing strategies, leveraging influencer partnerships, social media campaigns, in person events and out of home advertising including high impact billboards.

Speaker 2

The brand is equally focused on strategically expanding its assortment highlighting key trends such as everyday basics, elevated floor prints and this season's trending colors. Petal and Pop also continues to strengthen its exclusive style portfolio, capturing additional share of wallet with its second wedding guest Modern Romance collection, which exceeded performance expectations and deeply resonated with customers during the collection's debut last spring. I'm more confident than ever that Petal plus Puck is well positioned to capitalize on significant untapped market potential. Shifting to our streetwear brands, we have made great progress over the last eighteen months optimizing Culture Kings operations across both regions and the results are very encouraging. We have added strategic hires in the beginning of twenty twenty five, including a new President of Australia and a Global Head of In House Brands, who brings valuable experience to both our U.

Speaker 2

S. And Australian operations, positioning Culture Kings for long term growth and innovation. Culture Kings stands apart in the streetwear landscape by leading with its in house designed apparel, positioning the brand for sustained long term growth. Culture Kings in house brands, including sought after labels like Minimal, Loiter, Carre and St. Morte consistently rank among top sellers both online and at the Las Vegas flagship store.

Speaker 2

To complete the three wear outfit and enhance its market credibility, Culture Kings complements these in house brands with exclusive footwear, headwear and accessories from premium third party brands, including industry titans like New Era, Mitchell and Ness and New Balance. In the back half of last year, Culture Kings began narrowing its focus on their top in house and third party brands that really moved the needle. This included shifting our in house brands to a test and repeat merchandising approach, which creates more fashion newness and reduces inventory risk. Culture King's in house brand, Leuter, is leading this merchandising transition and showcasing the effectiveness of the model. In the fourth quarter, Leuter put up another quarter of triple digit revenue growth with gross profit dollars growing even faster year over year.

Speaker 2

There is nothing quite like the immersive experience of the Culture Kings Las Vegas flagship store and we're actively looking for our next Culture Kings store location in The U. S, which will be smaller than our Vegas store while retaining key immersive elements such as the half basketball court and half wall. The immersive store and retail payment atmosphere are core to the Culture Kings' marketing strategy of creating unforgettable moments around product launches, in person experiences and tentpole moments that resonate deeply with its customer base. Before I pass it to Kevin, I'd like to reiterate my thanks to our incredible team for delivering a great year. Our portfolio consists of young brands still early in the growth trajectories with substantial global potential ahead.

Speaker 2

I'm confident that we have the right strategic initiatives in place and complete alignment across our teams to drive another year of strong performance in 2025. With that, I'll turn it over to Kevin to walk you through the financials.

Speaker 3

Thanks, Kieran. Let me start by saying that I'm thrilled to take on the role of CFO at AKA Brands and I look forward to working closely with all of you. As Kieran noted, prior to assuming the role of CFO, I was the company's controller and have been deeply involved in the company's financials since before our initial public offering. Now let me dive deeper into our fourth quarter results and give you our view on 2025. As Kyra noted, for the fourth quarter, net sales increased 6.8% to $159,000,000 and 6.7% on a constant currency basis compared to the same period last year.

Speaker 3

This was driven by strength in our U. S. Business in which net sales increased 21.6% compared to the fourth quarter of last year. This was partially offset by a 9.6% sales decline in Australia and New Zealand as compared to the fourth quarter of twenty twenty three, and net sales in the rest of world region declined 13.5% year over year. Early signs from Australia in 2025 are encouraging, and we expect the region to improve this year thanks to our team's extensive work in transitioning Culture Kings to a test and repeat model, while optimizing operational efficiencies across the region.

Speaker 3

Total orders for the fourth quarter were $2,040,000 increasing 3.6% as compared to the fourth quarter last year. Our trailing twelve month active customer count rose to $4,070,000 by the end of the fourth quarter, a robust 9.4% increase compared to a year ago. Our fourth quarter average order value was $78 increasing 2.6% compared to the fourth quarter last year. Turning now to our profitability metrics. Gross margin was in line with our expectations and expanded four sixty basis points in the fourth quarter to 55.9% compared to 51.3% in the same period last year.

Speaker 3

The increase in gross margin was driven by a higher penetration of newness and full price selling, and we also received the benefit of lapping markdown actions that we took in Australia in the fourth quarter of twenty twenty three. Selling expenses were $44,600,000 compared to $42,300,000 in the fourth quarter of twenty twenty three. As a percentage of net sales, selling expenses were 28% compared to 28.4% a year ago. Marketing expenses in the quarter were $22,300,000 compared to $17,300,000 in the fourth quarter of twenty twenty three. As a percentage of net sales, marketing expenses were 14% compared to 11.6% in the fourth quarter of twenty twenty three.

Speaker 3

General and administrative expenses were $24,900,000 compared to $22,300,000 in the fourth quarter of twenty twenty three due to an increase in incentive compensation and non routine legal matters. As a percentage of net sales, G and A expenses increased to 15.7% from 15% in the fourth quarter of last year. We're pleased that we delivered adjusted EBITDA of $6,200,000 compared to 1,300,000 in the same period last year, ahead of expectations. Adjusted EBITDA margin for the fourth quarter of twenty twenty four increased 300 basis points to 3.9% compared to 0.9% in the same period last year. Turning now to the balance sheet.

Speaker 3

We ended the quarter with $24,200,000 in cash and cash equivalents compared to $21,900,000 at the end of the fourth quarter of twenty twenty three. And we ended the year with $111,700,000 of debt. As a reminder, we significantly reduced our leverage by over a turn and a half over the past two years and we're committed to bringing leverage down even further. We ended the quarter with $95,800,000 in inventory, an increase of 5% compared to a year ago. We are very pleased with our ability to effectively manage our inventory growth below our net sales growth, demonstrating the benefits of the test and repeat merchandising approach.

Speaker 3

Looking at 2025, we feel good about the quality and composition of our inventory and we are confident that we are well positioned as we head into our brand's key spring and summer seasons. We generated $7,000,000 in operating cash in the fourth quarter compared to $15,000,000 in operating cash in the same period last year. A quick update on our stock buyback program. We continue to believe that our stock is undervalued. And in the fourth quarter, we purchased 11,000 shares for a total cost of $243,000 As of the end of twenty twenty four, we have $1,300,000 remaining in our share repurchase authorization.

Speaker 3

Looking ahead, as Kieran mentioned, we're encouraged by the momentum we're seeing and confident that our strategic initiatives will deliver solid top line growth and profitability over the near and long term. For the full year of 2025, we expect net sales of $600,000,000 to $610,000,000 representing growth in the range of 4% to 6% driven by double digit growth in The U. S. Region and improving trends in the Australia and New Zealand region, which contemplates an approximate $10,000,000 FX headwind. Excluding the impact of FX, our 2025 net sales outlook would be growth in the range of 6% to 9%.

Speaker 3

We anticipate adjusted EBITDA to be between $27,500,000 and $29,500,000 representing growth in the range of 18 to 27% from last year. Our adjusted EBITDA outlook contemplates all tariffs enacted to date inclusive of our actions to mitigate the impact. Our outlook also contemplates gross margin approximately flat to last year, modest leverage in both selling and marketing expense and slight deleveraging G and A expense, excluding stock compensation, depreciation and amortization and non routine items due to modest headcount investments to support our channel expansion efforts. For modeling purposes, we are planning fiscal twenty twenty five stock based compensation of approximately $8,000,000 to $10,000,000 depreciation and amortization expense of roughly $18,000,000 to $20,000,000 interest and other expense of approximately $10,000,000 to $12,000,000 and effective tax rate of negative 40% and weighted average diluted share count of approximately $10,800,000 We expect fiscal twenty twenty five capital expenditures in the range of $12,000,000 to $14,000,000 dollars primarily related to opening seven Princess Polly stores this year. For the first quarter of twenty twenty five, we expect net sales to be between $121,000,000 and $124,000,000 which contemplates an FX headwind of approximately $1,500,000 representing growth in the range of 4% to 6% and consistent with our annual outlook.

Speaker 3

Adjusted EBITDA is expected to be in the range of $1,500,000 and $2,000,000 driven by sales growth and gross margin expansion as we lap the targeted inventory actions at the Culture Kings brand in the first half of last year. We are expecting weighted average diluted shares of 10,700,000.0 in Q1. In closing, we made great progress delivering on our key priorities in 2024, leading to strong top and bottom line results. We are well positioned to build on this momentum as we move into 2025. And I look forward to an exciting year ahead.

Speaker 3

Now, we'll open it up for your questions.

Operator

Thank you. We will now be conducting a question and answer session. And our first question comes from Ryan Mayers with Lake Street Capital. Please proceed with your question.

Speaker 4

Hey, guys. Thanks for taking my questions. First question for me. So it sounds like you were saying that The United States growth in the 2025 guide should be double digits. But just curious if you can comment on maybe what you're seeing outside of The U.

Speaker 4

S. That gives you confidence in a rebound there?

Speaker 2

Yes. Thanks, Ryan. Look, I think overall, it's great to see the progress we're making. The U. S.

Speaker 2

Growth of 22% in Q4, it's great to see that kind of continue. Also, just the improving comps we've seen in the Australia region. And I think we've seen improving comps across the brands. And I think as we continue to bring more and more of Culture Kings own brands onto our test and repeat model, that look, we know that model is so strong. We are seeing good performance there.

Speaker 2

I think as we talked a little bit about in Q3, Lloyd's continues to be a standout there. We saw comps of up over 100 in Q4 across both regions for Lloyd Wright and gross margins up even further. And I think as we continue to roll out that test and repeat model, we expect that performance to continue. And look, we have added more talent to the Culture Kings team. We have a new President of Culture Kings in Australia, Justin Hilberg, who has deep background in the region in that streetwear space and across stores and online.

Speaker 2

And we've also brought in Brad Lancaster to head up our as Head of our first party brands and really kind of seeing them already make an impact in the last couple of months and looking forward to what they can do there just to help Culture Kings grow not just in Australia but really across all regions.

Speaker 4

Okay. Got it. And then just thinking about the potential impact of tariffs here in The United States, maybe comment on your guys' ability to be able to take price and not have that come at the expense of volume or even maybe customer growth?

Speaker 2

Yes. Thanks, Ryan. Look, I think our guidance does contemplate all that we've seen in tariffs at this point, and we're happy to see that our EBITDA is going up even with the impacts of tariffs. I think we are primarily sourced out of China today. Our sourcing team is actively working with vendors to mitigate the impact of the tariffs we've seen to date.

Speaker 2

But look, I think we are uniquely positioned with the business model that we have to take price. And for us, we think about that because we're pretty much exclusively online to date, although we are adding stores and wholesale. The product we have is exclusive to us, but also with our test and repeat model, right, as we're launching new products each week, we just have a unique opportunity to take place there. And I feel with the strength of our brands, we can do that. It's certainly not where we want to go first.

Speaker 2

We're actively working with our vendors, looking at moving sourcing to different locations. But we feel good about the guidance and feel good that we can offset the impact of tariffs.

Speaker 4

Okay. Got it. Thanks for taking my questions.

Operator

Thank you. And our next question comes from Ashley Owens with KeyBanc Capital Markets. Please proceed with your question.

Speaker 5

Hi, good afternoon and thanks for taking the questions. I wanted to start on the gross margin guide. I'm just curious, in the past, you've discussed how strong margins have really been underscored by the test and repeat model and we really saw that play out within the second half of the year. Could you just give us some perspective as to some of the puts and takes for that flat gross margin guide this year and maybe the magnitude of impact from increasing wholesale penetration, tariffs and maybe just also some color on the shaping of the year would be helpful.

Speaker 3

Yes. Thanks, Ashley, for the question. As Karen mentioned earlier, we're really forecasting in our outlook that gross margin will be roughly flat to FY 2024. And there certainly are some puts and takes to that. As we've mentioned, that guidance embeds the impact of known tariffs as well as the actions we're taking to mitigate those tariffs.

Speaker 3

From a shaping perspective, we certainly will see towards the first half of the year, we're lapping some promotional actions taken in Australia in FY 2024. We'll see some improvement there. As we go through the year, we'll see a shape that looks very similar to FY 2024. And as we continue through Q4, Q4 is our more promotional period and we'll see gross margins lower than Q2 and Q3. We do see we will see over time an impact of the growing wholesale initiatives upon our gross margin.

Speaker 3

In this year, it's not going to be a tremendous impact, but we feel confident with our outlook and where we're heading for FY 2025.

Speaker 5

Okay, great. And then I guess just second on that and just talking about the wholesale channel for you guys, doing more in terms of expansion this year, but also adding in some of the poly stores as well. Could you just provide updated thoughts on the overall mix of the business and any thoughts as to how big of a contributor wholesale could be or get to over the next couple of years? I think more so in 2026 and beyond just based on what you just said, but any color there?

Speaker 2

Yes, sure. Thanks, Ashley. Look, I think we're really happy with the progress we're making across all of the brands and leaning into that strategy of putting our product wherever our customers are once it's brand enhancing and has the right economics. I think we've really seen that in The U. S.

Speaker 2

With that continued plus 20% growth in kind of the back half of '20 '20 '4. Also with our active customer count up 9% year over year, just really strong engagement there. I think for us, doing that test in Nordstrom with Princess Polly and Petrol and Pop in Q4 and seeing them move quickly to wanting to bring both brands in house for spring summer across all of their chain, I would say, look, it gives us a lot of confidence on the wholesale opportunity and I suppose the opportunity that we're seeing across wholesale stores and online for all of the brands. I think we feel there's a huge opportunity there. I think as a mix of business, I think long term, we're always going to be predominantly online, but we feel it's just a big opportunity across our brands in all of the channels.

Operator

And our next question comes from Eric Beder with SCC Research. Please proceed with your question.

Speaker 6

Good morning. Excuse me, good afternoon. Let's talk a little bit about Culture Kings. It seems like you're making significant progress there. You mentioned in your remarks potentially about adding a store in The U.

Speaker 6

S. What would kind of be the performance or the markings you would see before you decide that would be something that you'd want to tell us through? And how should we be thinking about that?

Speaker 2

Yes. Sure, Eric. Look, I think we are we've continued to see great progress of Culture Kings in The U. S, right, from an online perspective, also in their Vegas store. And so they continue to use marketing activations in the store to bring that brand to life online and that unique retail payment aspects that they have.

Speaker 2

I think all of that gives us confidence on the long term opportunity for Culture Kings in The U. S. I think as we've moved more and more of their first party brands onto the test and repeat model, we're also seeing improved sales comps, improved margin performance and really just great customer reaction to the new product they're bringing in. So I think we're certainly bringing together all the pieces we need to continue kind of going after that Culture Kings expansion opportunity. We are looking for store locations for Culture Kings.

Speaker 2

We're working through what aspects of the Vegas store we will bring in to that new location in The U. S. We would like to have one this year, and we will share more on timing as we get clarity on the location.

Speaker 6

Great. In terms of Princess Polly and the store expansion, excuse me, you're up to six coming to 13. What level of infrastructure do you need to build to make sure that the stores kind of maintain the quality control that you want them to have? And how should we be thinking about the ability to leverage Afternoon infrastructures and how the potential to leverage it going forward? Thank you.

Speaker 2

Yes. Thanks, Eric. Look, we're really pleased with what we've seen so far on the Princess Polly stores. And as we think about that, it's around building that brand. We see 30% of the customers coming into the store are new to the brand.

Speaker 2

We've also seen very clearly now that the stores are having a halo effect within the region of the store, and we're kind of measuring that on about a 10 mile radius. And so, all giving us a lot of confidence. I would say, look, the stores are new to Princess Polly and working through that. They have added some talent last year, but that is doing a great job of rolling out the new stores, operating them. I feel, look, we have internally, and we're continuing to the team are continuing to push themselves to do better, bring do better from a merchandising and a visual merchandising perspective in the store.

Speaker 2

We will add some we will continue to add some talent this year in our to go after those store opportunities, but pretty modest and all contemplated in our guidance. And look, I feel like there's just a lot of opportunity for Princess Polly themselves across all their channels that they're in to continue to build that brand.

Speaker 6

Great. Good luck for 2025.

Operator

Thanks. Thank you. And our next question comes from Randy Konik with Jefferies. Please proceed with your question.

Speaker 4

Hey, thanks a lot. Sorry, I got on a little late here. Ron, just walk us through your thoughts on just the environment right now. It seems like you guys are getting seeing some stable stabilization trends and getting more visibility in the business. Maybe just walk us through that, where we've come from over the last few quarters and then how you think about kind of the trends in the and your idiosyncratic trends

Speaker 3

in your business relative to the environment will be super helpful as we think about the balance of 2025? Thanks.

Speaker 2

Yes, sure, Randy. And look, I'm delighted with the work the team has done to kind of bring us through the journey and bring a lot more stability to what we have and really, I think, just keep demonstrating the opportunity that we have long term with all of these brands. If I think maybe regionally, I think we are seeing improvements in comp in Australia. And I think as I talked about, a lot of that coming from moving Culture Kings on to that test and repeat from merchandising model. I think we feel very confident that we will continue to see improvements there coming from moving them onto that test and repeat model, but also the talent that we've brought in and the opportunity that they can go after there.

Speaker 2

And so, feeling good in the progress that we are making there. I think, look, the standout for us continues to be The U. S, right? Overall growth of 17% last year coupled with a 9% growth in active customers. As Kevin talked about margins up, EBITDA margins up significantly year over year.

Speaker 2

And I think really showing, I think, the power of this model and the strength and opportunity we have across these brands. I think for us, it's been, I would say, Q1, we certainly saw, I suppose, a distracted consumer in that January period and a combination of the fires and weather, TikTok, distraction as well. I think we are seeing improvements in comps as we've gone through the quarter. I think particularly at Poly and Petal, that spring summer products has really kicked We feel really good about the inventory and the newness that we're bringing in. And for Poly, their white dresses has kicked off in a big way.

Speaker 2

It's a little bit later than last year, but coming strong. And for Petal, just doing a really nice job with the newness that they have across prints, some of the elevated florals and from a color perspective, just doing really well on their gelato pastels is performing really strongly for them. So, look, I think we feel really good about the opportunity. We feel we've got a unique model here that allows us to operate differently and just gives us a great long term opportunity.

Speaker 4

Super helpful. Last question, I saw the announcement about the Princess stores, Princess Polly stores in 2025. Can you give us your thoughts on like a broader long term vision on how you think about different channels of distribution now that you're building more of a stores business. You have obviously done some stuff in wholesale and obviously the DTC with ecom. Maybe give us your thoughts on how your vision, let's say, three to five years away on how you kind of think about the different channels and how they should kind of commingle?

Speaker 2

Yes. Thanks, Sandy. Look, I think, again, a huge opportunity. I think the tests we've done across the brands have been really informative for us, and I think it's fantastic the success that each of the brands have seen in the different channels. And as we think about it, it's very much back to that strategy, right?

Speaker 2

Are we putting our products in front of customers where they are? Is it brand enhancing from a customer a brand building perspective? And also, does it have the right economics for us? I think they are really the choices we make. I think as we think about the different channels, our online business is uniquely positioned with our test and repeat model to bring in newness every week.

Speaker 2

That's core to what we do. It's core to the brands. It's really what our customers want. I think that's something we want to bring to life in our own stores, and we are working to do that. That newness every week really works for us.

Speaker 2

I think with wholesale partners, that's a little bit more difficult, but still great places to just show off great products, put it in front of new customers. And look, we're seeing that success in what we're doing at Nordstrom and some of our other wholesale partners. So, I think we'll continue to lean into those three areas. And I feel like we'll make sure I think long term we'll predominantly be direct to consumer business, but I feel there's big meaningful opportunities for us with our own stores and from a wholesale perspective.

Speaker 4

Great. And I look forward to seeing

Speaker 2

you in a couple

Speaker 4

of weeks at the Princess store. Thank you.

Speaker 2

Yes. We'd invite you all to come there. It's a superstore and we're delighted to open it up in New York in next week.

Operator

Thank you. There are no further questions at this time. That also does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Powered by Quartr
Earnings Conference Call
a.k.a. Brands Q4 2024
00:00 / 00:00