Q2 2025 a.k.a. Brands Holding Corp Earnings Call

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Emily Schwartz. Thank you you may begin.

Good afternoon. Thank you for joining AK brands to discuss our second quarter 2025 results released this afternoon, which can be found on our website at IR Dot AK Dutch friends Dot Com with me on the call today is Carol <unk>, 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.

We're looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed.

For 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.

Greetings and welcome to AKA Brands Corporation, second quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our release furnished to the SEC and available on our website with that I'll turn the call over to Kieran.

I would now like to turn the conference over to your host, Emily Schwarz. Thank you. You may begin

Good afternoon, everyone and thanks for joining our call to discuss the second quarter.

I want to begin by thanking the team for their exceptional execution and dedication in delivering another solid quarter of performance.

AKA dbr.com with me on the call today is here on Long chief executive officer and Kevin Grant, Chief Financial Officer.

We're pleased to report that the business maintained strong momentum with net sales exceeding expectations.

We also delivered on our profitability expectations, underscoring our ability to adapt and execute in this dynamic landscape.

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.

Now, let me share some highlights from the second quarter.

We grew net sales approximately nine 5% on a constant currency basis to $160 5 million, marking our fifth consecutive quarter of growth.

for looking statements involve risks and uncertainties, that could cause actual results to differ materially from those expressed,

For further discussion of risks related to our business. Please see our filings with the SEC.

U S, which is our largest and fastest growing region delivered net sales growth of 14% in the quarter.

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 ibida and adjusted ibido margin

The double digit growth reflects the successful execution of our merchandising and marketing initiatives across our brand portfolio, which resonated with customers throughout the spring and early summer season.

Reconciliations of these non-gaap measures to the most comparable. Gaap measures are included in the release, furnished to the SEC and available on our website with that. I'll turn the call over to cure on.

We're also pleased with the performance in the Australia region with net sales flat to last year, which was ahead of our expectations and the meaningful margin improvement as we lap the heavy promotional activity in the second quarter of last year.

Good afternoon, everyone, and thanks for joining our call to discuss the second quarter.

I want to begin by thanking the team for their exceptional execution and dedication in delivering, another solid quarter of performance.

We deepened our customer connections and increased our total addressable markets active customers grew 3% on trailing 12 month basis, and our global orders increased by 7%.

We're pleased to report that the business maintains strong momentum, with net sales exceeding expectations.

We also delivered on our profitability, expectations underscoring, your ability to adapt and execute in this Dynamic landscape.

In addition to the strength in our direct to consumer channels. Our Omnichannel expansion plans remain on track and all new channels are exceeding expectations.

Now, let me share some highlights from the second quarter.

Princess Polly successfully opened three stores in the second quarter and we plan to open eight to 10 more Princess Polly stores in 2026.

We grew net sales approximately 9.5% on a constant currency basis to 160.5 million. Marking our fifth consecutive quarter of growth

The U.S., which is our largest and fastest-growing region, delivered net sales growth of 14% in the quarter.

We're also strengthening our wholesale partnerships to accelerate brand awareness and we're particularly pleased with Princess Polly and Petland Pulps Nordstrom chain wide debuted which gives us confidence in the tremendous global opportunities for our brands.

The double digit growth, reflects the successful execution of our merchandising and marketing initiatives across our brand portfolio, which resonated with customers throughout the spring and early summer season.

And lastly, benefiting from the strong topline growth expanding brand awareness and continued operating discipline, we delivered $7 5 million of adjusted EBITDA in line with our expectations.

We're also pleased with the performance in the Australia region with net sales, flat to last year, which was ahead of our expectations and a meaningful margin Improvement as we lack the heavy promotional activity in the second quarter of last year.

Before sharing our brand highlights I want to first provide an update on our tariff mitigation efforts.

As mentioned on our first quarter earnings call, we've taken a three pronged approach to tariffs, including vendor discounts diversifying our supply chain.

We deepened our customer connections and increased our total addressable markets, active customers grew 3% and trailing 12 month basis and our Global orders increased by 7%.

Strategic price increases across our brands.

In addition to the strength in our direct consumer channels or on the channel expansion plans, remain on track and all new channels are exceeding expectations.

Moving forward in Q4, and beyond we expect that our sourcing diversification and strategic price increases will offset the impact of the tariffs at the current levels.

Princess Polly successfully opened 3 stores in the second quarter. And we plan to open 8 to 10 more princess Polly stores in 2026,

With regards to our supply chain, we've been working diligently over the past nine months with a global manufacturing partner to diversify our sourcing and build long term flexibility.

We're also strengthening our hotel Partnerships to accelerate brand awareness and we're particularly pleased with Princess Polly and Petland pulps Nordstrom's chain white debut, which gives us confidence in the tremendous Global opportunities for our brands.

The transition is on schedule and we have already received products from our new vendors and are pleased with the lead times quality and cost.

Our redesigned sourcing ecosystem allows us to maintain the high product quality standards that we and our customers expect while also working with manufacturing partners that are fully equipped to support and enhance our tests will repeat merchandising approach.

And lastly, benefiting from the strong Topline growth, expanding brand awareness and continued operating discipline. We delivered 7.5 million of adjusted. EBA in line with our expectations

Before sharing our brand highlights, I want to First provide an update on our tariff mitigation efforts.

Moving forward, our sourcing will be diversified across several countries with sourcing from China, particularly focused on newness and our Australia business.

As mentioned on our first quarter earnings call we've taken a 3-pronged approach to tariffs, including vendor discounts diversifying our supply chain and strategic price increases across our brands.

I'm confident that we've established in supply chain that is flexible more cost efficient and geographically diversified across multiple countries.

Providing us the ability to adapt our supply chain.

Moving forward in Q4 and Beyond, we expect that our sourcing diversification and strategic pricing will offset the impact of the tariffs at the current levels.

That future trade dynamics evolve.

I'm also grateful to our teams who have worked tirelessly over the past nine months to implement or updated sourcing structure make it stronger and more resilient than ever.

With regards to our supply chain, we've been working diligently over the past 9 months with a global manufacturing partner to diversify our sourcing and build long-term flexibility.

In addition to diversifying our supply chain as mentioned our brands implemented targeted and strategic price increases to offset the impact of tariffs.

The transition is on schedule. And we've already received products from our new vendors and are pleased with the lead times quality and costs.

We're fortunate that almost all of the products are exclusive to us, allowing us to take pricing action if needed.

We will continue to monitor price elasticity throughout the remainder of the year.

our redesigned sourcing ecosystem, allows us to maintain the high product, quality standards that what we and our customers Expect While also working with manufacturing partners that are fully equipped to support and enhance our tests and repeat merchandising approach,

As mentioned in Q4 and beyond we expect that our sourcing diversification and strategic price increase will offset the impact of tariffs at the current levels.

Moving forward, our sourcing will be Diversified across several countries with sourcing from China, particularly focused on newness, and our Australian business.

I am confident that our updated sourcing strategy flexible business model and speed of execution positions us to emerge stronger than we were at the start of the year.

I'm confident that we've established a supply chain. That is flexible, more cost-efficient and geographically Diversified across multiple countries.

Importantly, while we navigated the macro environment, we remain committed to building our brands for the long term.

Providing us the ability to adapt or supply chain.

At Future trade Dynamics evolve.

Delivering high quality fashion to our customers and balancing both growth and profitability.

We remain laser focused on our strategic growth drivers for the year first we will attract and retain customers on our direct to consumer channels through trend driven exclusive merchandising and distinctive marketing strategies.

Secondly, we will expand brand awareness through physical retail growth and select wholesale partnerships and third we remain committed to streamlining operations and strengthening our financial foundation to support long term profitable growth.

Now turning to our brand highlights.

Beginning with Princess Polly our largest brands accounting for approximately half of our total revenue.

I've mentioned in Q4 and Beyond we expect that our sourcing diversification and strategic price increase will offset the impact of cars at the current levels.

This policy is a leading fashion brand known for its trend forward high quality styles authentic marketing and deep connections with the next generation of consumers.

I'm confident that our updated sourcing strategy, flexible business model and speed of execution positions us to emerge stronger than we were at the start of the year.

It's successful Omnichannel strategy, which combines its established digital presence with an expanding retail footprint continues to fuel strong financial performance enhanced brand visibility and drive meaningful customer acquisition.

Importantly while we navigated the macro environment, we remain committed to building our brands for the long term.

Delivering high quality fashion to work customers and balancing both growth and profitability.

Core to Princess Polly successful merchandising strategy is it's demand driven test to repeat model, which enabled the brand to frequently delivering <unk> to its customers.

We remain laser focused on our strategic growth drivers for the year.

First, we will attract and retain customers on our direct consumer channels through trend-driven, exclusive, merchandising and distinctive marketing, strategies.

This deeply resonates with Gen Z shoppers, particularly around key moments like prom and graduation, which fueled double digit growth in the dress category year over year.

In addition to our strong performance in dresses Princess Polly a steadily expanding its presence in customers' closets through growing its matching sets bottoms denim and swim categories, which have seen strong growth year over year.

Secondly, we will expand brand awareness through physical retail growth and select wholesale Partnerships and third. We remain committed to streamlining operations and strengthening our financial Foundation to support long-term profitable growth.

now, turning to our brand highlights,

Beginning with Princess Polly, our largest brand accounting for approximately half of our total revenue.

Complementing strong merchandising strategy, Princess Poly's marketing efforts fueled customer engagement and brand growth across multiple channels.

Princess Polly is a leading fashion brand known for its Trend forward high quality Styles, authentic marketing, and deep connections with the next generation of consumers.

<unk> ticked off the brand is seeing significant momentum with a 60% year over year increase in tip top shop revenue and flows into new customers.

As early adopters of tick Tock search ads in both the U S and Australia to Brian continues to lean into one of the most popular platforms for its customers.

A successful omnichannel strategy, which combines its established digital presence with an expanding retail footprint, continues to fuel strong financial performance, enhance brand visibility, and drive meaningful customer acquisition.

Beyond Tictoc Princess Polly stays in front of its customers through SMS marketing influencer collaborations new advertising channels, such as Twitch, and Netflix as well as in person events.

Corps to Princess Polly successful merchandising strategy is its demand driven test to repeat models, which enables the brand to frequently deliver new styles to its customers.

Looking ahead to the second half of the year, we're excited to launch an upcoming influenced collaboration with model and summer host Star Alexia Wood.

This deeply resonates with Gen Z, Shoppers particularly around key moments like Prime and graduation which fuel double digit growth in the dress category year-over-year.

In addition, Princess Polly is deepening its connections with the student community through Immersive College campus stores, featuring exclusive giveaways branded Activations and interactive experiences, which will begin in Miami during the back to school season.

In addition to a strong performance and dresses, princess Polly is steadily expanding its presence in customers Clauses, through growing, its matching sets, bottoms Denim. And swim categories, which have seen strong growth year-over-year.

We're also really proud that Princess Polly recently received its B Corp certification, which formalizes the significant progress. The brand has made on this ESG goals and reaffirms its commitment to making on trend fashion more sustainable.

Compared to dancing strategy, princess Polly's, marketing efforts, Fuel customer engagement and brand growth across multiple channels.

On TikTok, the brand is seeing significant momentum with a 60% year-over-year increase in TikTok, sharp revenue, and thousands of new customers.

Following a series of successful store openings in 2024, and early 2025, Princess Polly expand its retail footprint in the second quarter with three new locations in Miami, Florida, Columbus, Ohio, and Glendale, California.

As early adopters of Tik Tok search ads in both the US and Australia the brand continues to lean into 1 of the most popular platforms for its customers.

Bringing the total store count to 10.

The stores are outperforming expectations in both revenue and customer acquisition.

Beyond TikTok, Princess Polly stays in front of its customers through SMS marketing, influencer collaborations, and new advertising channels such as Twitch and Netflix, as well as in-person events.

Notably approximately 30% of in store shoppers are new to the Princess Polly brands and we're seeing a halo effect on our surrounding digital business with each new store opening.

Looking ahead to the second half of the Year. We're excited to launch. An upcoming influencer collaboration with model and summerhouse star Lexi wood.

<unk> the power of its Omnichannel strategy.

In addition, Princess Polly is deepening, its connections with the student community Through immersive college campus stores.

Princess Polly is on track to open three more stores by the end of the year and long Island, and Westchester, New York and King of Prussia, Pennsylvania.

Featuring exclusive, giveaways, branded, activations, and interactive experiences, which will begin in Miami during the back to school season.

Excitingly. The brand is also set to open its first store in Australia later this year in Bondi Beach.

True to Princess Polly is test and learn approach each new store opening provides an opportunity to refine key elements such as store size inventory management and visual merchandising with the potential to enhance store level financial performance as more stores are opened.

We're also really proud that Princess Polly recently received and speed Corp certification, which formalizes the significant progress. The brand has made on its ESG goals and reaffirms its commitment to making on-trend fashion, more sustainable.

Looking ahead to 2026, we plan to maintain our pace of store openings with a goal of opening eight to 10, new Princess Polly stores next year.

Following a series of successful store openings in 2024 and early 2025, Princess Polly expanded. Its retail footprint in the second quarter with 3 known locations in Miami Florida, Columbus, Ohio and Glendale California.

Bring the total store count to 10.

We look forward to sharing more details on store locations in the coming quarters.

The stores are outperforming expectations in both revenue and customer acquisition.

Complementing Princess Polly digital and retail store strategy. The brand is expanding its reach through select wholesale partnerships, including a growing relationship with Nordstrom.

Notably approximately 30% of in-store, Shoppers are new to the princess Polly brand. And we're seeing a halo effect on our surrounding digital business. With each new store opening,

We remain very pleased with the results to date and are looking forward to fall and homecoming collections that will launch in stores in September with.

Highlighting the power of its Omni channel strategy.

With marketing Activations in select Nordson stores.

Princess Polly is on track to open 3, more stores by the end of the year in Long Island, and Westchester New York, and King of Prussia Pennsylvania.

Our other women's brand pediment pulp also continues to resonate with its core 25% to 40 year old female customer through a curated assortment of feminine fashion everyday essentials and occasion styles at accessible price points.

Excitingly. The brand is also set to open its first store in Australia later this year in bondai Beach.

Through to princess Polly's test and learn approach. Each new store, opening provides an opportunity to refine key elements, such as store size, Inventory management, and visual merchandising,

Key dependent on pumps brand is that substrate and heritage Vought Instyle and the aesthetic and the brand is strategically leveraging its June hemisphere presence.

with the potential to enhance store level financial performance, as more stores are opened

Utilizing the test to repeat merchandising model.

The brand first launched Starz in Australia season ahead, allowing it to identify top performers and competently scale winning pieces for the U S market with expanded callaway's upfronts.

Looking ahead to 2026, we plan to maintain our pace of store openings, with a goal of opening 8 to 10 new Princess Polly stores next year.

We look forward to sharing more details on store locations in the coming quarters.

Customers are also responding enthusiastically to fresh trends with strong full price selling for new styles reinforcing that when the product is on trend demand follows.

Complimenting princess Polly's digital and Retail Store strategy. The brand is expanding. Its reach through select Hotel Partnerships including a growing relationship at Nordstrom.

Dresses and matching sets continued to be category leaders for Katherine pulp with these categories outperforming in both sales and product mix year over year.

We remain very pleased with the results today and are looking forward to fall and homecoming collections that will launch in stores in September.

With marketing activations in select Nordstrom stores.

On the marketing front pattern and purpose driving brand awareness and engagement through a mix of immersive experiences and digital innovation.

This quarter the brand posted two pop up Activations, one in Abbott Kinney in Venezuela, and another in Bondi, Sydney, each featuring branded flower carts and curated styles as they deepen customer connections.

Our other women's brand pedal and pop also continues to resonate with its core, 25 to 40 year. Old female customer through a curated assortment of feminine fashion every day Essentials and occasion Styles at accessible price points.

In parallel patent on pulp is actively testing new growth levers and it ticked up shop, including promotion offers and creator affiliate programs to further expand reach and drive conversion across social commerce channels.

Key. The Pain and Pops brand is part of the Australian heritage, but in style and aesthetic, the brand is strategically leveraging its dual hemisphere presence.

We remain highly encouraged by patent on pulp strong performance at Nordstrom following its full railroad across all locations. This spring.

Utilizing the test to repeat merchandising models, the brand first launches Styles in Australia at season ahead, allowing you to in identify top performers, and confidently. Scale, winning pieces for the US market with expanded colorways or prints.

The brands high quality trend forward styles at accessible price points are filling a clear white space in the Nordstrom Assortments and are resonating strongly with customers.

customers are also responding enthusiastically to Fresh Trends, with strong phone price, selling for new Styles reinforcing that when the product is on Trend, demand follows,

In store and online sales as well as product view of the Nordstrom Dot com consistently exceed expectations with May and June delivering exceptionally strong results supported by shop in shop experiences and coordinated marketing activations across Nordstrom doors.

Dresses and matching sets continue to be category leaders for pedal and pop. With these categories outperforming in both sales and product mixed year-over-year.

On the marketing front pedal and pop is driving brand awareness and engagement through a mix of immersive experiences and digital innovation.

While dresses and event where remain key strengths. We're also seeing strong demand for more casual styles highly.

Highlighting the brand's broader appeal and significant growth potential in the U S market beyond location driven categories.

This quarter, the brand hosted two pop-up activations: one in Abbot Kinney in Venice, LA, and another in Bondi, Sydney, each featuring branded flower carts and curated styles to deepen customer connections.

Looking ahead. The teams are actively collaborating in the fall assortment, which will feature holiday dresses and knits beyond the strong financial upside. The Nordstrom partnership is also proving to be a powerful driver of brand awareness and reinforces our conviction patent impulse long term potentially turning to cause kings and minimums are.

In parallel technopop is actively testing new growth levers on Tik Tok shop including promotion offers and Creator affiliate programs to further, expand reach and drive conversion across social commerce channels.

We remain highly encouraged by pain and pop strong performance at Nordstrom following, its full railroad across all locations, this spring

<unk> brands, we continue to be pleased with the improvement in our Australia business fueled by our turnaround efforts over the last two years, we took deliberate actions, including strengthening the leadership team shifting production to the test and repeat merchandising approach and improving the operations across across both regions and the results are encouraging.

The brand's high-quality, trend-forward styles and accessible price points are filling a clear white space in the Nordstrom assortment and are resonating strongly with customers.

What sells what sets <unk> apart in the street, where space is its portfolio of trends, leading in house brands, including loiter minimal carre enceinte mortar, which consistently ranked among the top best sellers.

In store and online sales, as well as product views and nordstrom.com consistently exceed expectations with May and June, delivering exceptionally strong, results supported by shop, and Shop, experiences, and coordinated, marketing, activations, across Nordstrom's doors.

While dressed as an event where we make key strengths. We're also seeing strong demand for more casual sales.

Following the transition to the test and repeat merchandising approach in Australia, we're seeing excellent results with in house brands revenue growth of double digits in the second quarter of the year.

Highlighting the Brand's broader appeal and significant growth potential in the US market Beyond occasion, driven categories.

In addition to the in house brands roughly half a culture teams assortments comprises legacy and emerging.

Emerging third party brands to complete district, where outfit.

Looking ahead. The teams are actively collaborating in the fall assortment which will feature holiday dresses. In this the other strong financial upsite, the northern partnership is also proving to be a powerful driver of brand awareness and reinforces our conviction pedal and Parks long term potentially.

In close partnership with New era, <unk> weekly exclusive headwear drops continued to see significant growth over last year.

I'm also excited to share the <unk> in the U S is launching a partnership with added us with assortment building in the first quarter of 2026 in time for the World Cup posted here in North America.

Turning to Culture Kings and minimums or a street wear Brands. We continue to be pleased with the improvement in our Australian business, fueled by our turnaround efforts over the last 2 years.

<unk> brings the signature retail tainment to life through high energy events that feature Lloyd's music celebrity appearances and Ashley talked of Activations, making every brand interaction exciting and unique.

We took deliberate actions including strengthening the leadership team. Shifting production to the test and repeat merchandising approach and improving the operations across across both regions and the results are encouraging.

In the second quarter the brand partnered with WWE for a highly successful exclusive collection launch at Las Vegas store, drawing over thousand customers for meet and greets with five WWE superstars.

What says, what sets Culture Kings apart in the street where space is its portfolio of Trends, leading in-house Brands including loiter, minimal care, and ST. Morta, which consistently ranked among the top best sellers

Following the transition to the test and repeat merchandising approach in Australia. We're seeing excellent results with in-house Brands, Revenue, growth of double digits in the second quarter of the year.

The event included accustomed WWE cage installation and curated displays from the efficient WWE archive.

This activation drove significant foot traffic and sales spark via social media moments and delivered a truly memorable experience for fans and customers.

In addition to the in-house Brands, broccoli half of Culture Kings, assortment comprises Legacy, and Amer merging third-party Brands to complete the street World fit.

In close partnership with new era culture. King's weekly exclusive headword drops continue to see significant growth over last year.

In addition to its eight in store events <unk> continues to build brand awareness through high impact Activations at major music festivals in the second quarter, including Coachella, Stagecoach EDC and summer Smash.

I'm also excited to share the Culture Kings in the US is launching a partnership with Adidas with a sort of building in the first quarter of 2026 in time for the World Cup hosted here in North America.

In closing I'm proud of our second quarter results and the meaningful progress across our key initiatives.

While the impact of tariff remains a short term temporary headwind. It's also an opportunity to showcase the resilience of our brands and the strength of our business model.

Celebrity appearances and athletes hosted activations, making every brand interaction, exciting and unique.

With our new sourcing structure in place strong demand for our brands and the continued disciplined execution from our teams I am confident that we are well positioned to capture additional market share and drive growth and profitability over the near and long term.

In the second quarter, the brand partnered with WWE for a highly successful, exclusive collection launched at its Las Vegas store, attracting over a thousand customers for meet and greets with five WWE Superstars.

With that I'll turn it over to Kevin to take you through the financials in more detail.

The event included a custom WWE cage, installation, and curated displays from the official WWE archive.

Okay.

Thanks, Karen we are pleased with our second quarter results in which sales growth came in higher than our expectations.

This activation drove significant foot traffic in sales sparked viral social media moments and delivered. A truly memorable experience for fans and customers.

For the second quarter net sales increased seven 8% to 165 million and nine 5% on a constant currency basis compared to the same period last year.

This was driven by continued strength in our U S business, which increased 13, 7% to $108 million year over year.

In addition to its in store events Culture, Kings continues to build brand awareness, to high impact activations. At Major music festivals in the second quarter including Coachella. Stage coach EDC and summer smash

Sales in Australia over $45 7 million flat to last year in.

In closing, I'm proud of our second quarter results and the meaningful progress across our key initiatives.

In the second quarter of last year, we were particularly promotional culture Kings in Australia, as we look to right size its inventory.

While the impact of tariff Remains the short term temporary headwind. It's also an opportunity to showcase the resilience of Our Brands and the strength of our business model.

Given the actions we've taken over the past two years, along with the improving macroeconomic landscape in the region. We continue to see the Australia business stabilize and improve.

Total orders for the second quarter were $2 5 million, increasing six 8% as compared to the second quarter last year.

With our new sourcing structure in place, strong demand for our brands, and the continued disciplined execution from our teams, I'm confident that we are well positioned to capture additional market share and drive growth and profitability over the near and long term.

Our brands continue to resonate as we acquire new customers and retain our existing customers.

With that, I'll turn it over to Kevin to take you through the financials in more detail.

Our trailing 12 month active customer count rose to $4 3 million at the end of the second quarter, which is a 3% increase compared to a year ago.

Thanks Kan. We are pleased with our second quarter results in which sales growth came in higher than our expectations.

And our second quarter average order value was $78 consistent with the second quarter last year.

For the second quarter, net sales, increased 7.8% to 160.5 million and 9.5% on a constant currency basis compared to the same period last year.

Turning now to our profitability metrics.

Gross margin declined 20 basis points in the second quarter to 57, 5%.

This was driven by continued strength in our us business which increased 13.7% to 108 million year-over-year.

Slightly ahead of expectations compared to 57, 7% in the same period last year.

We saw improvements in gross margin year over year, primarily due to more full price selling.

Sales in Australia were 45.7 million flat to last year. In the second quarter of last year, we were particularly promotional at Culture Kings in Australia, as we look to rightsize, its inventory.

However, inventory that we received and sold in Q2, when the China tariff was at its most elevated rate had a net 120 basis point transitory headwind on our gross margin.

Given the actions we've taken over the past 2 years, along with the improving macroeconomic landscape. In the region, we continue to see the Australia business stabilized and improved

We will continue to experience a similar impact in the third quarter as we sell through the remainder of that inventory.

Total orders for the second quarter were 2.05 million, increasing, 6.8% as compared to the second quarter last year.

As Kieran mentioned moving forward in Q4, and beyond our sourcing diversification and strategic price increases will offset the tariffs at the current levels.

Our Brands continue to resonate as we acquire new customers and retain our existing customers.

Selling expenses were $45 4 million compared to $41 2 million in the second quarter of 2024.

Our trailing 12-month active customer count rows to 4.13 Million by the end of the second quarter, which is a 3% increase compared to a year ago.

As a percentage of net sales selling expenses were 28, 3% compared to 27, 7% a year ago.

And our second quarter, average order value was 78. Consistent with the second quarter last year.

Turning now to our profitability metrics.

The year over year increase was primarily due to an increase in store selling expenses as we expanded our retail footprint.

Gross margin declined, 20 basis points in the second quarter to 57.5%.

Additionally, as we managed through the extremely elevated tariff rates, we had some labor inefficiencies in our fulfillment centers as we stopped and restarted the timing of inventory receipts during the quarter.

Slightly ahead of expectations compared to 57.7% in the same period last year.

This disruption was temporary and our fulfillment centers for back to operating at normal levels and efficiencies at the start the third quarter.

Marketing expenses in the quarter were $19 9 million compared to $18 3 million in the second quarter of 2024.

We saw improvements in gross margin year-over-year, primarily due to more for full price selling, however, inventory that we received and sold in Q2, when the China Tariff was at its most, elevated rate had a net 120 basis, point transitory headwind, on our gross margin.

We'll continue to experience a similar impact in the third quarter as we sell through the remainder of that inventory.

As a percentage of net sales and marketing expenses were 12, 4% compared to 12, 3% in the second quarter of 2024 in line with our expectations.

As Kiran mentioned, moving forward in Q4 and beyond, our sourcing diversification and strategic price increases will offset the tariffs at the current levels.

General and administrative expenses were $27 5 million compared to $25 9 million in the second quarter of 2024.

Selling expenses were 45.4 million compared to 41.2 million in the second quarter of 2024.

As a percentage of net sales G&A expenses decreased to 17, 1% from 17, 4% in the second quarter of last year.

As a percentage of net sales, selling expenses were 28.3% compared to 27.7% a year ago.

We delivered $7 5 million in adjusted EBITDA in line with our expectations.

The year-over-year increase was primarily due to an increase in store selling expenses as we expanded our retail footprint.

This compares to $8 million in the same period last year.

Adjusted EBITDA margin for the second quarter of 2025 declined 70 basis points to four 7% compared to five 4% in the same period last year, primarily as a result of the increased tariffs.

Additionally, as we managed through the extremely elevated tariff rates, we had some labor inefficiencies in our facilities as we stopped. And restarted, the timing of inventory receipts. During the quarter,

This disruption was temporary, and our fulfillment centers were back to operating at normal levels and efficiencies at the start of the third quarter.

Turning now to the balance sheet, we ended the quarter with $23 1 million in cash and cash equivalents compared to $25 5 million at the end of the second quarter of 'twenty four.

marketing expenses in the quarter were 19.9 million compared to 18.3 million in the second quarter of 2024,

Debt at the end of the quarter was $108 7 million compared to $106 9 million a year ago.

We're especially pleased that we brought our leverage down to three five times compared to five five times in the second quarter of last year.

As a percentage of net sales marketing expenses were 12.4% compared to 12.3% in the second quarter of 2024 in line with our expectations.

We ended the quarter with $92 5 million in inventory, which is down 13% compared to a year ago, largely driven by healthier inventory levels at our street wear brands as well as the impact of the elevated tariffs.

As a percentage of net sales, GNA expenses decreased to 17.1% from 17.4% in the second quarter of last year.

A quick update on our stock buyback program.

We delivered 7.5 million in adjusted, EBA in line with our expectations.

In the second quarter, we purchased approximately 12000 shares for a total cost of approximately 110000.

This compares to 8 million in the same period last year.

As at the end of Q2, we have 1 million remaining in our share repurchase authorization.

Turning now to our guidance, we're confident that our demand for our brands is strong and we're continuing to deliver on trend fashion that our customers love, while broadening our reach and acquiring new customers through omnichannel initiatives.

Adjusted EBIT down margin for the second quarter of 2025 declined 70 basis points to 4.7% compared to 5.4% in the same period last year, primarily as a result of the increased tariffs.

For the full year, we're raising our top line outlook for net sales to be between $608 million to $612 million representing growth in the 5% to 7% range up from our previously expected outlook of growth in the 4% to 6% range.

Turning now to the balance sheet we ended the quarter with 23.1 million in cash and cash equivalents compared to 25.5 million. At the end of the second quarter of 24.

Debt, at the end of the quarter was 108.7 Million compared to 106.9 million a year ago.

We're also raising our adjusted EBITDA outlook to be between $24 5 million to $27 5 billion.

We are especially pleased that we brought our leverage down to 3.5 times compared to 5.5 times in the second quarter of last year.

Our outlook contemplates no changes to the tariff rates in place as of today August 6th.

For the full year 2025, we anticipate gross margin to be between 57, and 57, 4% with the other expense rates relatively in line with our prior outlook.

We ended the quarter with 92.5 million in inventory, which is down 13% compared to a year ago. Largely driven by healthier inventory levels at Our streetwear Brands as well as the impact of the elevated tariffs.

A quick update on our stock buyback program. In the second quarter, we purchased approximately 12,000 shares for a total cost of approximately $110,000.

For modeling purposes, we anticipate fiscal 2025 stock based compensation of approximately $8 million to $10 million depreciation and amortization expense of roughly $19 $21 million interest and other expense of approximately 13% to $15 million and effective tax rate of negative 25% Capex between 2014.

As of the end of Q2, we have 1 million remaining in our share repurchase authorization.

Turning. Now to our guidance, we're confident that our demand for Our Brands is strong and we're continuing to deliver on Trend fashion that our customers love. While broadening our reach and acquiring new customers through Omni Channel initiatives.

The $16 million, which includes the addition of Princess Poly's, New store in Australia, and weighted average diluted share count of approximately $10 8 million.

Turning now to our third quarter outlook, while our sourcing diversification is underway and on schedule contemplated in our third quarter outlook includes a temporary pullback on newness and promotions in July we.

For the full year, we're raising our Top Line outlook for net sales to be between 608 million to 612 million representing growth in the 5 to 7% range up from our previously expected Outlook of growth in the 4 to 6% range.

We're also raising our adjusted ebita Outlook to be between 24.5 million to 27.5 million.

We expect net sales to be between $154 million and $158 million.

As mentioned the tariffs will have a similar net 120 basis point impact on our gross margin in the third quarter as we continue to work through inventory brought in during the extremely elevated China tariff rates and we expect gross margin in the range of 57, 6% to 57, 8%, which contemplates this net 120 basis.

Our Outlook contemplates. No changes to the Tariff rates in place as of today, August 6th.

For the full year of 2025, we anticipate gross margins to be between 57 and 57.4% with the other expense rates relatively in line with our prior Outlook.

Point impact.

We expect adjusted EBITDA to be between seven three and $7 7 million.

For modeling purposes for the third quarter, we anticipate stock based compensation of approximately two three to $2 5 million depreciation and amortization of five $5 million to $6 million interest and other expense of $3 million to $4 million and effective tax rate of zero capex between $4 million to $5 million and weighted average diluted share.

Remodeling purposes. We anticipate fiscal 2025 stock-based compensation of approximately 8 to 10 million depreciation and amortization expense of roughly 1921 million interest. And other expense of approximately 13 to 15 million and effective. Tax rate of negative 255% capex between 14 to 16 million which includes the addition of Prince of poly's new store in Australia and weighted average diluted share count of approximately 10.8 million.

<unk> of $10 9 million in the third quarter.

In closing, we're incredibly proud of our team and how we are navigating the dynamic tariff environment, our ability to quickly pivot our sourcing base, while maintaining the integrity of our unique model and serving our customers was no small feat.

Turning now to our third quarter outlook. While our sourcing diversification is underway and on schedule, contemplated in our third quarter outlook includes a temporary pullback on newness and promotions in July.

We expect net sales to be between 154 million and 158 million.

I would like to thank our amazing team here for all of their hard work and dedication.

As Kieran mentioned, we are confident that AK brands has emerged stronger and better positioned to deliver on our strategic priorities and generate long term value for our shareholders.

With that we'll open it up for questions.

As mentioned, the tariffs will have their similar, net 120 basis, point impact on our gross margin in the third quarter. As we continue to work through inventory, brought in during the extremely elevated China, tariff rates and we expect gross margin in the range of 57.6% to 57.8% which contemplates this net 120 basis, point impact.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

We expect adjusted ibaa to be between 7.3 and 7.7 million.

A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for speaker for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

For modeling purposes. For the third quarter, we anticipate stock-based compensation of approximately 2.3 to 2.5 million depreciation and amortization of 5.5 to 6 million.

Interest in other expensive 3 to 4 million and effective tax rate of zero capex between 4 to 5 million and weighted average diluted shares of 10.9 million in the third quarter.

Our first question comes from Randy Connick with Jefferies. Please proceed with your question.

In closing, we're incredibly proud of our team and how we are navigating the dynamic tariff environment.

Current will be really helpful to us is is you're getting a lot of success with it sounds like Nordstrom and some of these princess Polly stores, some very exciting maybe it would be really.

Our ability to quickly pivot our sourcing base while maintaining the integrity of our unique model and serving our customers was no small feat.

I would like to thank our amazing team here for all of their hard work and dedication.

Youre kind of educational for us to kind of think through the long term how do you think about the.

The distribution model between DTC.

As Kiran mentioned, we are confident that AKA brands has emerged stronger and better positioned to deliver on our strategic priorities and generate long-term value. For our shareholders,

E Com stores and wholesale just kind of give us your high level thoughts there would be very very helpful. Thanks.

With that, we'll open it up for questions.

Yes, Thanks, Randy and look we're really pleased with.

Our strategy of taking these brands into Omnichannel is working I think in particular, the overall growth fifth quarter, we'll know of 95% and then that 14% in the U S and I think 36 on a two year stack is I think really showing what demand is there for these.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keys 1 moment. Please while we pull up for questions,

Brands.

We had good progress on how we're executing against the different channels I think.

our first question comes from Randy konik with Jeffries. Please, proceed with your question.

We're really seeing.

It's great that Princess Polly stores, delivering sales process building brand awareness, although 30% of the customers are new to the brands in the store and then I think just.

Princess Polly and packaging and pulp in particular are executing and Nordstrom really thing just really positive reactions from customers in there and I would say are reacting to the breadth of the categories of the of the product. They have probably brought on we see online.

Um, current will be really helpful to us is, is you're getting a lot of success with sounds like Nordstrom and you know, some of these, uh, Princess Polly stores. Uh, sound very exciting. Maybe it would be really, uh, you know, kind of educational for us to kind of think through the long term. How do you think about, you know, the the distribution model between DTC, uh, Ecom, uh, stores and wholesale, just kind of give us your high level of thought there would be very, very helpful. Thanks.

I think look we feel we're just getting started here we're going to continue to move into these opportunities I think.

Big opportunity for us to just continue to increase the time of these brands and continue to build on that Brian the awareness.

We talked about we are going to open and right now we're planning for eight to 10, New Princess Polly stores next year and I think for us very focused on just finding.

Using our data finding the right model and the right location in the malls and so we'll be very mindful there and look we're just going to continue.

Go after the opportunity here across all the channels.

Yeah, thanks, Randy. Um, look, we're we're really pleased with the, you know, how how our strategy of of taking these, uh, Brands into on the channel is working. I think, in particular, you know, the, the overall growth this quarter in a rural know of of 9 and a half percent and then that, you know, 14% in the US, and I think 36 and on a 2 years, back is, I think really showing, uh, what the mind is there for these Brands. You know, um, really good progress on how we're executing against the different channels. I, I think, um, you know, we're really seeing, you know, it's great. The princess Polly store is delivering sales profits building brand awareness, you know, about 30% of the customer.

Great. That's Super helpful. And then just how do you how do we also think about long term sourcing structure, how do you want to approach that.

Across the entire business and any differences between.

For the brand specifically.

Yes, Thanks, Brian Thanks, Randy look I think we then.

We were predominantly source those China, certainly and we started looking at diversification opportunities probably nine months ago at this stage.

Huge integration.

Work all of the team has done on diversifying us.

We are no we've been rapidly moving out of China.

We have partnered with a global company to do that.

Already gotten product from then it's received and shipped out to customers. So just to have made huge progress over the last couple of months.

And I think it sets us up in a space, where we feel we have a much more robust supply chain that will help us scale. It's much more flexible. So if we see changes in the macro environment. We can react there and look it's also in a spot where.

Are new to the brands in the store. And then I think, just the how, how Princess Polly and petal and pop in particular are are executing in Nordstrom really think just really positive reactions from from customers in there and I would say reacting to, you know a breath of the the categories of of the product they have probably bought and we see online and I think look we we feel we're just getting started here. We we're going to continue to lean into these opportunities. Um, I think, you know, there's there's big opportunity for us to just continue to to increase the time of these Brands, um, and continue to, to build on their brand awareness. Yeah, I think, you know, we talked about, we, we're going to open, um, right now we're planning for 8 to 10 new princess Polly stores next year. And I think for us very focused on just finding, you know, using our data, finding the the right mall and the right location in the malls. And so, you know, we'd be very mindful there. Um, and look, we're just going to continue to to to go after the opportunity.

Here, across all of the channels.

The changes we've made combined with the price increases that we took in may and will allow us to offset the impact from the tariffs as they currently stand and look if there are other changes in the macro environment, we feel that we can with this partner.

Great. That's, that's super helpful. And just just have you, how do we also think about long term sourcing structure, how do you want to approach that, uh, across the entire business and any differences between, uh, you know, for the brand specifically?

Has flexibility across different regions and can move there so.

Really really good with the progress we've made and the huge credit.

All of the people and all the teams that have worked on us and so feel pretty good about how we're set up and that we can continue to execute on this test and repeat model, which really differentiates us.

Super helpful. Thanks, guys.

Our next question comes from Ryan Meyers with Lake Street Capital. Please proceed with your question.

Yeah thanks, thanks. Randy. Look, I I think we've um you know we we were predominantly sourced out of China, you know? Certainly um we started looking at diversification opportunities probably 9 months ago at this stage and you know, hugely grateful to the the work, all of the team has has done on on diversifying us. Um, you know, we we are now, you know, we've been rapidly moving out of China, you know, we have, you know, partnered with a, a global company to do that. Um, we've already gotten products from them, it's received in shipped out the customer, so just to have made huge progress. Oh, over the last, you know, couple of months.

Hey, guys. Thanks for taking my questions.

First one for me I just wanted to get a good understanding of the gross margin dynamics in the third quarter. Kevin you had laid out kind of some detail on that but just wanted to make sure I fully understand it. So it sounds like the tariff impact will be prevalent in the third quarter, but you guys won't see you won't see that offset quite as much from the product newness.

Like you saw here in the second quarter, largely the Q2 gross margin for me came in actually higher than what I had expected you saw sequential increase there, but just any more commentary you can provide on where sort of the gross margins will shake out in the third quarter would be helpful.

Yes, yes. Thanks, Thanks, Brian for the question, Yes, we were really pleased with the gross margin performance in Q2 ahead of expectations to 57, 5%.

Um, and I think, you know, it sets us up in in a space where we feel we have a much more robust supply chain and that will help us scale. It's much more flexible. So if we see changes in the macro environment, we can react there and look it's also in a, in a spot where, you know, the changes we've made combined with the price increases that we took in May um, will allow us to offset the impact from the tariffs as they currently stand. And look, if there are other changes in the macro environment, we feel that we can, you know, with this partner, you know, has flexibility across different regions and and can move there. So, you know, if they really, really good with the progress we've made, and, and a huge credit to, to, to all of the people and all the teams that have worked on that. And so feels pretty good about how we're set up and you know that we can continue to execute

That you mentioned and that did include a headwind of about 120 basis points impact.

On this test and repeat model, which really differentiates us.

Super helpful. Thanks guys.

Impact net of the actions that we took during the quarter, including the.

Our next question comes from Ryan Meyers with Lake Street Capital, please. Proceed with your question.

The pricing that was implemented in may and most of that was really coming from those elevated tariff rates from China during.

During the month of April and so what we've talked about is we will see that similar 120 basis point headwind into Q3 as we sell through the rest of that inventory acquired at those elevated.

At those elevated rates.

Excluding the impact of the tariffs we saw some really strong gross margin expansion and a lot of that to do with the work that we've done it culture kings transitioning into a test and repeat model and also just getting their inventory in the right position.

Here in the second quarter. Largely the the Q2 gross margin for me came in actually higher than what I had expected. You saw sequential increase there but just you know any more commentary you can provide on where sort of the gross margins will shake out um in the third quarter, it would be helpful.

Also pulled back a little bit on promotion during the quarter in Q2, as we as we manage through.

The tariff and the supply supply chain disruptions and we expect to get back to our kind of normal promotional cadence in Q3. So.

Q3 gross margin that you alluded to.

Little bit of an expansion relative to Q2 about 20 basis points and that just continues to represent the strong.

Work that we've done in terms of culture Kings and.

And the lapping of the promotional activities that we did last year and we feel really confident about that outlook and the guidance that we put out for the for the quarter and for the rest of the year.

Okay, Great. That's helpful. And then the only other question that I have is looking at the active customer number and then even the number of orders both obviously up which is nice to see I mean, maybe kind of unpack. How you guys are thinking about that and why you feel like you are able to really continue not only just the customer growth new customers to the brand itself, but just increasing.

Yeah. Yeah thanks. Thanks. Ryan for the question. Yeah, we were really pleased uh, with the gross margin performance uh in Q2 um, ahead of expectations, the 57 and a half percent, um, that you mentioned and that did, uh, include a headwind of about 120 basis points, uh, impact net of the actions that we, we, we took during the quarter including uh, the pricing that that was implemented, um, in May. And most of that was really coming from those elevated, tariff rates, from China, uh, during the month, of, of April. And so, what we've talked about is, we'll see that similar 120 basis point headwind into Q3 as we sell through the rest of that inventory, acquired, um, at those elevated, uh, at those elevated rates, um, you know, excluding the impact of, of the Tariff. We saw some really strong, uh, gross margin expansion. Uh, and a lot of that to do with uh, the work that we've done at Culture Kings uh, transitioning them to a test and repeat,

And sort of the frequency and the number of products that those customers themselves are buying.

Yes. Thanks, Ryan It is great to see the continued growth in active customers and I think.

Has been really strong.

Pretty consistent period of time, and I think that's really us executing.

Executing well against the strategy that we have of continuing to engage and retain our existing customers through both direct to consumer channels.

But also continuing to build.

New customers and brand awareness through leaning into our stores opportunities and the wholesale opportunities that we have across the brands.

Model. Uh, and also just getting their inventory in in the right position. Um, we also pulled back a little bit on promotion, uh, during the quarter and Q2 as we as we manage through, uh, you know, the Tariff and the supply supply chain disruptions and we expect to get back to our kind of normal promotional, uh, Cadence, uh, in Q3. So, you know, the the, uh, Q3 gross margin that you that you alluded to, uh, you know, a little bit of an expansion relative to Q2 about 20 basis points. And that just continues to, uh, represent the, you know, the strong, um, you know, work that we've done in terms of Culture Kings. And, uh, you know, in the lapping of the promotional activities that we did last year and we feel really confident about that Outlook and the guidance that we put out for the for the quarter and for for the rest of the year.

Core to that is obviously that kind of the the test to repeat operating model that we have of continuing to have on trends those accessible price points.

I think.

That's the model that sets us apart that's what we're going to continue to lean into and feel that we certainly have a lot more opportunity as we execute against the brands.

Awesome, Thanks for taking my questions.

Okay, great, that's helpful. And then, the only other question that I have is, you know, looking at the Active customer number and then even the number of orders both obviously up, which is nice to see. I mean, maybe kind of unpack, how you guys are thinking about that, and why you feel like you're able to really continue? Not only just the customer growth, new customers to the brand itself but just increasing sort of the frequency and the number of products that those customers themselves are buying

Our next question comes from Ashley Owens with Keybanc capital markets. Please proceed with your question.

Alright, great. Thanks, so much so first off in your prepared remarks, you discussed the lead times as part of tariff mitigation and I wanted to focus in on that relative to where we were prior to source pinch is the read through here that it's a quicker turnaround now and then given the test and learn nature, the merchandising strategy and emphasis on newness.

Yeah, thanks Ryan. You know, it is great to see the continued growth, inactive customers. And I think, you know, has been really strong though for for pretty consistent period of time and look I I think that's really, you know, us executing well against the strategy that we have of continuing to engage and retain our existing customers, you know, through those direct to Consumer channels.

How do you improve lead times fee opportunity to introduce more frequent prouder newness with Im sorry, Matt. Thanks.

Yes, Thanks Ashley.

Really happy with the as I say, it's kind of the progress that the teams have made on diversifying our supply chain and building more flexibility into that.

I think look we spent a lot of time and just for evaluating and finding partners that could work in our model right and Thats short lead time, but it's also.

But also continuing to build, um, you know, new customers and brand awareness through leaning into our stores opportunities and a wholesale opportunities that we have across the brands. You know, I think core to that is obviously that the kind of the the test and repeat operating model that we have of continued to have on Trend Styles and accessible price points. You know, I think we that's that's the the model that sets us apart. That's what we're going to continue to lean into and and feel that we we certainly have a lot more opportunity as we execute against the brands.

Awesome. Thanks for taking my questions.

Working in a model, where you're testing so starting with a small number of units.

For every new store, we're bringing in but quickly building on top of that as we see success. So going from 100 200 units of 2000 and beyond finding partners that can do that certainly takes time, particularly with the quality expectations that we have in the pricing expectations that we have.

Our next question comes from Ashley Owens. With keybanc capital markets. Please proceed with your question.

We're in a really good spot that we can continue to scale with the partners that we have I think for US making sure lead times are short allows us just to be very much on trend from a fashion perspective.

All right. Great. Thanks so much. So first off in your repair remarks, you discussed the lead times as part of tariff mitigations and I wanted to focus in on that relative to where we were prior to sourcing shifts, is the read through here, that it's a quicker turnaround now and then given the test and learn nature of the merchandising strategy in the emphasis on the

Nunes how to improve lead times, create opportunity to increase, more frequent, or broader newness within the assortment thanks.

Being on trend certainly for us, we feel leads to better customer engagement conversion and more effective marketing.

Sure.

Markdown risk and overall just better financial performance. So that's just a key aspect of our sourcing strategy and it is very important as we look forward.

Okay, Great and just a follow up so with Australia, and New Zealand TQ.

From a growth perspective due to that comparison heavy promotions last year.

Just any color you could provide us the expectations for the remainder of the year <unk> should be the low point of growth for that region has seen that far away.

Yes, Thanks Ashley for the question, Yes, we're really pleased with that Q2 performance a bit better than our expectations flat.

For the quarter and on the heels of a nice growth in the quarter.

We're definitely seeing strong performance across all of the all the brands we've mentioned.

Culture Kings and all the work that we've done to move them to test and repeat and get their inventory position in the right place.

We're certainly seeing the dividends of that.

<unk> coming through into the results.

From a kind of a macro perspective, we're definitely seeing some improvement.

Have, you know, I think we've, you know, in a really good spot. Now we can continue to scale with the with the partners that we have. I think, you know, for us, you know, making sure lead times are are, are short allows us just to be very much on trend, from the fashion perspective. And, you know, being on Trend, certainly for us, we feel needs to better, you know, customer engagement conversion, you know, more effective marketing, you know, lower um, markdown risk and overall just better financial performance. So that's just a key aspect of our sourcing strategy and is very important as we look forward.

There and Thats certainly.

Coming to bear on their results as well.

What I would say is that improving macro environment in Australia is giving us confidence we've just talked about.

<unk> seen the first Princess Polly store in Australia in Bondi in late Q4, and we're just going to continue to lean into that into that opportunity and for.

Okay, great. Then just a follow-up. So with Australian ya in New Zealand 2q just sounds for growth perspective due to the comparison from heavy promotions last year so just any color you could provide us to expectations for the remainder of the year. If 2 Q should be the low point of growth for that region as we move forward.

<unk> for the back half I would say, we expect to kind of see.

<unk> to slightly up in terms of sales growth.

Appreciate the color. Thank you.

Our next question comes from John Kim with TG TD Cowen. Please proceed with your question.

Thank you for taking my question I would love to get additional color just around new England Boston.

Yeah, I think. Thanks Ashley for the question. Uh yeah, we're really pleased with that Q2 performance a bit better than our expectations flat, uh, for the quarter, and on the heels of of, uh, a nice growth in in the quarter. Um, you know, we're, we're definitely seeing, uh, a strong performance across, all the, all the brands. And, you know, we've mentioned, uh, uh, you know, Culture Kings and, and all the work that we've done to move them to test and repeat and get their inventory position, uh, in the right place. And we're we're certainly seeing the dividends of that uh,

And how you're feeling about it constantly ahead of the holiday season.

And then also any color around traffic margin in <unk>.

On your brand.

Notable chat and that you are seeing on that side would be helpful. As well. Thank you very much.

Yes, Thanks Joanna.

I would say look from an inventory perspective.

I think a lot.

Okay.

Gone through kind of changes there with as we've kind of sole rapidly changed or sourcing and made choices on.

Pacing of bringing in new inventory in replenishment, particularly when the China turnover. So we're at such a high level during Q2.

You know, coming through into the results, um, you know, from a kind of a, a macro perspective, we're definitely seeing some improvement uh there and and and that's certainly uh, you know, coming to bear on the results. Uh, as well. You know what, what I would say is, you know, that improving macro environment in Australia is giving us confidence. Uh, you know, we've just talked about announcing the first princess Polly store in Australia in Bondi in Lake Q4. And we're just going to continue to lean into that oper into that uh opportunity and, you know, for the back half, I would say we we we we expect to kind of see, you know, flat to to to slightly up. And in terms of of sales growth

We obviously, we kind of ended the quarter with inventory down 13% when you compare that to the sales of 9% in U S. 14% I think we certainly felt like we came out of the quarter, probably later than we wanted to be from an inventory perspective, working really hard to kind of get back.

Appreciate the color. Thank you.

Our next question comes from Jonah Kim with TG TD Cowen, please proceed with your question.

The in stock levels, we want across the business and thats going on at pace at the moment.

Thank you for taking my question. I would love to get additional color, just around your inventory. Position, how you're feeling about it, especially ahead of the holiday season.

As we've kind of made such progress on moving our supply chain, we certainly feel by the end of the quarter.

I'll be back to where we want to be and feel good that we will be where we need to be as we kind of head into holiday and we'll continue to make progress as we go through the quarter.

And then also any color around traffic conversion and tickets. Um from you know, your brand and any specific notable Trend that you're you're seeing on that front will be helpful as well. Thank you very much.

I think as it relates to.

The other Kpis in Q2, I would say in general we felt.

Really good about the demand that we continue to see for the brands across all of the channels.

Certainly the traffic was there conversion was good.

I think with the actions we took on pulling back on promotions and.

With the changes in pacing in inventory not having the level of newness that we would've had in the past we certainly saw some impact on the metrics, but overall feel really good about the <unk>.

<unk>, that's there and the continued opportunity we have across.

Across the brands.

Thank you very much.

Our next question comes from Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi, Good afternoon, everyone. As you saw the U S business basically holding steady at up nearly 14% how much of that how does the breakdown occurred there what are you seeing on the wholesale side. What are you seeing on the retail store and online side and as you move forward through the balance of the year.

Yeah, thanks Joanna. Um, you know, I, I would say look, uh, from from an inventory perspective, you know, I, I think a lot is, uh, you know, gone through kind of changes there, with, as we've kind of so rapidly changed or or sourcing. And, and made choices on, you know, pacing of bringing in new inventory and, and replenishment. Particularly when the the China Towers were at such a high level during Q2 and, you know, we we obviously, we kind of ended the quarter with inventory down 13%, you know, you compare that to the sales of 9% and, you know, us up 14%. I think we certainly felt like we came out of the quarter, probably later than we wanted to be from the inventory perspective. You know, working really hard to, to kind of get back at the, in stock level, we want across the business. And, and that's going on at PACE at the moment. Um, as we've kind of made such progress and and moving our supply chain, we certainly feel by the end of the quarter and, uh, we'd be back to where we want.

To be and, you know, feel good that we will be where we need to be as we kind of head into the holiday. And we'll continue to make progress as we go through the quarter. You know, I think as it relates to, um, you know, the other KPIs in Q2, I would say in general, we felt, you know.

Thinking about price increases for the for the different channels for the different brands and then I have a follow up thank you.

Sure. Thanks Dana.

Yeah look I think we're really happy with the demand we saw from the brands in Q2, and the overall growth like instead of 99, 5% in U S up 14.

<unk>.

The consistency of that I think is great to see as well, particularly with all the actions we had to take during the quarter as we kind of manage to the macro environment I think across the channels.

Really good about the demand that we continue to see for the brands across all of the channels. Um, you know, certainly the the the traffic was their conversion was good. You know, I think with the the actions we took on pulling back in promotions and you know, you know with the changes in pacing and inventory and not having the level of newness that we would have had in the past. We we certainly saw some impact on the metrics but overall feel really good about the the demand that's there and the continued opportunity we have across the brands.

Thank you very much.

We continued to see strength going through the quarter.

Really strong response to for the first time growing chain wide with Nordstrom for petrol and pulp and Princess Polly.

Our next question comes from Dana telsey, with telsey Advisory Group, please proceed with your question.

That's great as well to see the the marketing.

Marketing activations that the person pulp team had with Nordstrom during the quarter and just how positive customer response was to that.

The Princess Polly stores.

Great performance. They are all kind of on track from a sales EBITDA perspective.

Nearly 14%. How much of that, how does the breakdown there? What are you seeing on the wholesale side? What are you seeing on the retail store and online side and as you move forward through the balance of the year? How are you speaking about price increases for the different, for the different channels for the different brands and then I have a follow-up. Thank you.

Meeting or.

Sure. Thanks. Dana.

Originally kind of expectations there.

<unk> continued to see great opportunity in that channel for the brand.

Really with the new customer growth and I would say just to kind of <unk>.

Different customer set that we seem to be engaging with there and so feel really good about the back half of the year and that we have a lot of opportunities to execute against.

Thank you.

And pricing, Ken how do you think about pricing.

Yes, we took actions.

In I suppose our approach to tariffs really Dana kind of kind.

Kind of viewed as a three pronged right going back to vendors.

Get some discounts and made some good progress there that that down pretty quickly.

Yeah. Okay. I think we're really happy with the the mind we saw for the brands in, in Q2 in the overall growth. Like I said, of 9, 9 and a half percent and us up 14. Um, and you know, the consistency of that I think is, is, is great to see as well, particularly with all the actions we have to take during the quarter as we kind of managed to the the macro environment, you know, I think across the channels, um, we we continue to see strengths on going through the quarter and, you know, really strong response to, you know, for the first time going chain wide with Nordstrom for petrol and puff and Princess Polly. Um, you know, was great as well to see the, you know, the the marketing activations that the pet and puff team had with Nordstrom during the quarter and just how positive customer response was to that.

Also diversifying our supply chain and taking pricing actions.

We looked at the opportunity in Q2 across the brands and across the U S business.

And so we did have some pricing opportunity.

We feel very fortunate that pretty much 100% of the product. We have is exclusive to us. So looking we did feel that we had the opportunity yeah.

So in general I would say we took it on on the U S pretty.

Pretty much on the significant amount of our assortment kind of across the brands. It ranged from kind of 5% to 8%.

You know, on the, on the princess Polly Stores, um, you know, I think great performance, they're all kind of, you know, on track from a a sales Evita perspective and you know, kind of meeting our um, our original kind of expectations there. You know, I think continue to see, you know, great opportunity in that channel for the brand, you know. Really, you know, with the new customer growth and I, I would say just a kind of different, uh, customer set that we seem to be engaging with their. Um, so look feel really good about the the back half of the year, um, and that we have a lot of opportunities to execute against them.

That combined with the with the progress we've made in diversifying our supply chain will allow us to offset the impacts of the tariffs and we'll get back to kind of more normalized gross margin in Q4 and beyond.

And then just lastly on the wholesale portion of the business.

You go beyond Nordstrom Bloomingdale's, Macy's any of the other wholesale accounts, even specialty wholesale accounts an opportunity for you.

Yeah, I think we certainly see that there is an opportunity there I think.

And dependent on pump team in particular, I would say, our billing and a really nice pipeline from a wholesale perspective.

Sure.

They're starting to talk to stitch fix they've been a little bit with Dillard's and so I think.

Thank you and pricing Karen. How do you think about pricing? Oh yeah, yeah. Um you know we took actions um in you know I suppose our our approach to tariffs really doing a kind of we we kind of view it as a 3-pronged, right? Going back to vendors, um, to get some discounts and made some good progress there and got that done pretty quickly. Um, you know, also diversifying our supply chain and taking pricing actions, you know, we looked at the opportunity in Q2 across the brands and across the, the, the US business. Um, and so we did have some pricing opportunities. Look, we're we're we feel very fortunate that, you know, pretty much 100% of the product we have, is exclusive to us. So, you know, looking we did feel that we had the opportunity, you know, in general I would say we took it on, on the

Us.

They are really I would say.

Great to see the progress in Nordstrom, great execution, there a great response, and I think it's also showing for others that pedal and pulp in particular is a brand that they should have I.

I think look for Princess Polly I.

I think between Nordstrom their own direct to consumer business and just focusing on their store opportunity will be where that Brian is that for a while.

Pretty much on, you know, the significant amount of our assortment kind of across the brands that ranged from kind of 5 to 8%. And, you know, that combined with the with the progress we've made and diversifying, our supply chain will allow us to to offset the impacts of the tariffs and we'll get back to kind of, you know, more normalized, gross margin in Q4 and Beyond

Thank you.

Wholesale portion of the business.

Our next question is from Eric better with small cap consumer research. Please proceed with your question.

Good afternoon.

Do you go beyond Nordstrom is Bloomingdale's Macy's? Any of the other wholesale accounts or even specialty wholesale accounts and opportunity for you?

I want to follow up on some questions here so.

I know you've only done basically about 10 stores with another three online.

Yeah, I, I think, you know, we we certainly see that there. There's an opportunity there. I think, um, you know, um,

Has been the learning and what are you incorporating in the newer stores to help drive even more productivity.

<unk> and the ability to respond to even quicker.

Yes, Thanks, Eric look I think we're really pleased with the progress that the Princess Polly team have made on executing the stores.

<unk> opened their first one in September 2023, we now have 10 open and then other four lined up actually.

The rest of the year and so.

Really happy with our progress I think we certainly see opportunities.

And and, and the pedal and pop team in particular, I I would say are building in in a really nice pipeline from from a wholesale perspective. Um, I think, you know, they're they're starting to uh, talk to stitch fix. There's been a little bit with Dillards. Um, and so I, I think, you know, they're they're really, I would say, you know, great to see the progress in Nordstrom. Great execution, there are great response and I think it's also showing, uh, for others that, you know, pedal and pocket in particular, is a brand that they should have. Um, I think look for, for princess Polly, we, you know, I think between Nordstrom their own direct consumer business and just focusing on on their store opportunity, we will be where that brand is at for a while.

Across merchandising and.

Thank you.

Combination within that I would say kind of what product, we're putting in new stores and then just the visual merchandising in the stores I think Paul is <unk>.

Our next question is from Eric better with small cap consumer research. Please proceed with your question.

Good afternoon.

<unk> established online direct to consumer business.

Um, you want to follow up on some questions here? So,

The in store I suppose.

The constraints that in store bring upon you are somewhat new to the team.

And we brought in some new members and with deeper experience on store merchandising visual merchandising to help execute against that opportunity and that's probably one of the big ones. I would also say look as we've gone through the journey over the last kind of 18 months, we have seen that.

You know, I know you've only done basically about 10 stores with another 3 online. You know, what has been a learning and what are you incorporating in the newer stores to help Drive, even more, uh, I guess productivity and the ability to respond even quicker.

That we've needed to increase the size of the stores.

And as we've put a broader set of <unk>.

The assortment includes Australia, we're getting better conversion.

Right.

<unk> expect the breath somewhat the breath that they have online that we could represent that in stores and so.

Doing that is important for us and will be one area, where we continue to execute against.

Okay.

Just one more.

So.

What is.

Where are you in terms of how should we think about the debt I know that it gets too next year it'll go current in the next.

Q, how should we be thinking about that is I guess an opportunity potentially to reset.

The company and provide more capital for growth. Thank you.

Yes, Eric Thanks for the question.

Really proud of the results in the quarter, we've talked through that.

Executing the stores, you know, they open their first 1 in September 2023, you know, we know of 10 open and then other, uh, 4 lined up actually for, for, for the, the rest of the year. And so, you know, really happy with our progress. I I think we certainly see opportunities and, um, across merchandising, and, and combination within that, I would say, kind of what product we're putting in the stores and then just the visual merchandising in, in, in the stores, you know, I think Paul's, you know, really established online direct to Consumer business. You know, the in-store, I spoke to the, the, the constraints that in store bring upon you are are, are somewhat new to the team. And, you know, we've brought in some new members and and with deeper experience on store merchandising visual merchandising to to help execute against that opportunity and that's probably 1 of the big ones. I, I would also say, look if if we've gone through the Journey,

Including from a cash perspective, we generated $10 million of cash from operations year to date.

Q2, we continue to bring the debt down continue to bring leverage down.

We're down about two turns year over year, and we continue to make progress on that front and it's a big priority for us.

While while at the same time, making the investments in the stores that is a big priority for us.

As you alluded to the debt does come due in September of 'twenty six.

Over the last kind of 18 months. We have seen that, you know, that we needed to increase the size of the stores. And and as we've put a broader set of um, Aerospace into the store, we're getting better conversions right. Customers. Expect the the breadth, some some of the breadth that they have online that we can represent that in stores and so be doing that is important for us and um we'll be 1 area where we continue to execute against.

With our performance our momentum and just how the brands are resonating we feel like we have a lot of confidence about our ability to refinance the debt.

Okay, um, just 1 more. Um, so what is where are you in terms of? And how should we think about the debt? I know that it gets due next year. It'll go current in the next

Good luck in the back half.

Thanks, Eric.

We have reached the end of our question and answer session and this concludes today's conference you may disconnect. Your lines at this time and we thank you for your participation.

Queue, how should we be thinking about that as both a I guess an opportunity potentially to reset. Um the company and provide more capital for growth. Thank you.

Yeah, Eric thanks for the question. You know, we uh really proud of the results in the quarter. We've talked through that and including from a cash perspective, we generated 10 million of um, cash from operations year to date, uh, through Q2. Uh, we continue to bring, uh, the debt down continue to bring leverage down, uh, we're down about 2 turns year-over-year, and we continue to make progress in that that front and it's a big priority for us. Uh, while it's while at the same time, making the investments in the stores that is, is a big priority for us. Um, yeah, as you alluded to the debt, does come due and, and September of, of 26, and, you know, with our performance and our momentum and just how the brands are resonating. We feel like we have a lot of confidence about our ability to refinance the debt.

Good luck in the backup.

Thanks Eric.

We have reached the end of the question and answer session, and this concludes today's conference, you may disconnect your lines at this time and we thank you for your participation.