A.K.A. Brands Q3 sales hindered by ANZ market, reveals search for new CEO is underway
A.K.A. Brands announced on Wednesday net sales decreased 9.6% to $140.8 million during the third quarter, on the back of lacklustre sales in overseas markets, partially offset by gains in the U.S.
The San Francisco-based company said the sales decrease was driven by a decline in the number of orders and average order value during the quarter, driven by adverse macroeconomic conditions in Australia and New Zealand.
That was partially offset by the U.S., where net sales increased 2%, and grew 9.7% on a two-year stack. The owner of Mnml, Princess Polly, and Culture Kings saw net losses widen to $70.4 million for the three months ending September 30, compared to a loss of $0.1 million last year.
Coinciding with the earnings update, A.K.A. Brands said company chief executive officer, Jill Ramsey, has made the personal decision to transition to a strategic advisory role, effective immediately.
Ramsey will remain an active board member on A.K.A. Brands’ board of directors. Ciaran Long, interim chief executive officer and chief financial officer will remain interim CEO while the board conducts a search.
“I am pleased to report that the improvements we have made to our operating model enabled us to generate positive operating cash flow of $11 million and deliver net sales growth in the U.S. in the third quarter,” said Long.
“We continue to strengthen our balance sheet by reducing debt by 26% year-to-date, coupled with a strategic reduction in our inventory position, which is down 21% year-to-date. I am also very pleased with the progress we are making in the U.S. where we registered third quarter net sales growth of 2%. Accounting for approximately 60% of total net sales, the U.S. region represents our greatest opportunity for growth and brand expansion. And lastly, we are very encouraged by the success of our omnichannel initiatives. The opening of our first Princess Polly store in Los Angeles has outperformed our expectations, fueling profitable in-store revenue generation, a halo effect in our e-commerce business and resulting in 30% of in-store customers new to the Princess Polly brand providing a significant runway for potential growth.
“Despite the growth in the U.S., we continue to face macroeconomic pressures in Australia, which led to lower-than-expected adjusted EBITDA. We are taking clear and decisive actions to improve our operations in the region, including rightsizing inventory to make way for product newness and rapidly transitioning Culture Kings to a data-driven, short lead time merchandising cycle. I’m confident that the actions we are taking will set our brands up for long-term success and that we will deliver both growth and profitability in 2024.”