Good afternoon. My name is Eric Bieder i m a head retailing analyst at Small Cap Consumer Research. It is our pleasure to introduce a.k.a. Brands, ticker symbol a.k.a. With us, we have CEO Ciaran Long. Ciaran joined a.k.a. Brands in April 2021 and was appointed interim CEO in March 2023. Today, you are now effectively a full-time CEO Congratulations.
Before joining a.k.a., Ciaran was with Walmart between 2014 and 2021. His final position was CEO at Sams Club.com and VP Finance for Membership, Marketing, and Supply Chain at Sam's Club. In case you did not see the press release today, they announced Q4 numbers, beat the street on both top line and on EBITDA, primarily driven by the U.S. operations, and we'll talk about that. Ciaran, why don't you describe the a.k.a. businesses and brands that you work with right now?
Sure. Thanks, Eric. And thanks for having us today l ooking forward to talking to you. So at a.k.a., we're a portfolio of brands. We've got four brands today, two women's brands and two that focus on the men's streetwear space.
Our largest brand, and it's about 50% of our business, is a brand called Princess Polly. It focuses very much on on-trend fashion at accessible price points and doing it in a sustainable way, and very much selling to that teen and college-age consumer. The second brand on the women's side is a brand called Petal & Pup, slightly different demographic, more in that kind of 15-40-year-old consumer, and dressing the woman for any of the special occasions that she has in her life.
On the men's side, we have Culture Kings is our largest brand there, very much an experiential retail experience, focus on the streetwear side, consumer in that kind of, again, teen, college age, and beyond, and does a lot from an experiential retail perspective s o kind of working across kind of music, sports, fashion, and bringing that to life in their stores and online. Then the fourth brand is a brand called mnml, much more focused on that kind of very much kind of, I would say, runway-inspired but accessible price point, and again, in that streetwear space.
Great. Thanks. So of these brands, you've purchased all four of them t hree of them originally had operations in Australia. Kind of talk to us why? how you thought about that when you acquired them, and is there some kind of advantage or something in the Australian thought process that works here in the U.S.?
Yeah. Yes. Three of our brands started in Australia. And what we saw there was just, I suppose, organic demand that the brands were having from the U.S. There were established businesses in Australia. Each of the brands have been around 10-plus years.
And we saw that demand from a very organic perspective in the U.S. T hey weren't spending marketing here. They didn't have operations here t hey didn't have fulfillment centers here. So we saw it as an opportunity to bring the brands here and scale them in the U.S., a market that's 17 times larger than the Australian market. Obviously, with kind of there is some advantage just being kind of in a different hemisphere. We do see trends that are strong there in Australia. We can bring them to the U.S. and obviously just scale them much quicker here.
Right. One of the core pieces of your company is this test-and-repeat model. I know I believe it started with Princess Polly, and now you've had it in all the brands. What is the model, and how does it give you an advantage when you go out to market?
Yeah. So core to our business, if you think of kind of what I said about Princess Polly, right, bringing on-trend fashion to that consumer, your ability to be on-trend is very much when you can make decisions on a short lead time where you can see what's happening out there in the market, and then you can react to that. So for Princess Polly, they'll introduce maybe 100 styles each week. And with that, they might go 200 units deep on any particular style.
As they see consumers react strongly to an individual style or an individual product, they'll buy back into that quickly and then continue to repeat that as they see kind of success there and move it more to an evergreen product that they're continuing to bring in. So for them, that test and repeat and obviously clear out, because you do have some products that don't win, just allows them to very much be on-trend.
And when you're on-trend and with that model, your marketing is much more efficient. You don't get into situations where you're very much over inventory and have to take big markdowns. And that just very much on-trend, much more efficient marketing, less markdowns, and overall, much better EBITDA than you would see in other places.
Great. Okay. So these brands all have most of their origins, especially on the U.S. side, were online only. And if you look at two or three years ago, you were almost entirely online only in the U.S. Since then, you've added stores for Princess Polly.
And you've expanded with online marketplaces at Nordstrom for both Princess Polly and Petal & Pup. And as we saw today in your press release, you've expanded now to all doors with Nordstrom for Petal & Pup, and you also have Princess Polly there. What is kind of the thought process in expanding beyond just the online channel, and how do you look upon that as the growth drivers going forward?
Yeah. Thanks, Eric a s I said, the brands have been around for 10 years and have had huge success from an online perspective and built very strong and very profitable business from an online perspective. I thought what we saw, though, is that, look, there's huge opportunity in just the physical retail that's there today, and with these brands being so young in the U.S., we've very much leaned into the strategy of, let's put our product where our customers are.
And if it's brand-elevating and it has the right economics, we should be happy to do that. We started first, I would say, with opening our first store w e opened our first store for Princess Polly in September 2023 in Century City in L.A., saw a lot of success there, and opened four more stores for Princess Polly in kind of late Q3, early Q4.
And as you mentioned, slightly different model in Petal & Pup, And we said, look, let's put it online at other marketplaces s o we went into Target, Macy's, Nordstrom. Saw a lot of success when we put it on Nordstrom in February last year.
With that success, Nordstrom asked us to do a test in store in October. We went into 40 doors with Petal & Pup. And based on that success we've seen over the last couple of months, we will be in all doors for Nordstrom for spring, summer this year with Petal & Pup. And so for us, we're going to continue to lean into that strategy of retain and hold on to the existing customers that we have from an online perspective, but also put our product where our customers are, whether that stores are in different places online.
Great. Let's talk about some of the brands a little bit more in depth. So let's talk with Princess Polly, your largest brand, 16 to 25-year-old market t hat's a very large market i t's also a very crowded market. How? do you kind of differentiate the product and pieces there, Kind of what does your customer, that customer, know you for at Princess Polly? Excuse me.
So i think with Princess Polly, they very much know us for a great product that's on-trend, high-quality perspective, but also very accessible from a price point. Polly also leans into experiences, right? So for them, just being very authentic from a marketing perspective, they've really built their business on influencer marketing.
Unlike other brands, there's no mega or huge influencers at Princess Polly, much smaller set of influencers k ind of they might have kind of about 4,000 influencers at any one time and constantly refreshing that group, making sure they're very kind of on point and authentically talking to that customer set.
And now, as we're starting to open stores for Princess Polly, I think it's been amazing seeing their customers walk up to the store in little groups and pointing to each other, look, there's the store, Let's get in there, Let's try stuff on a nd just that kind of in-real-life experience is just really resonating for that customer s o I think Polly's very early on their U.S. journey i think huge opportunity for them to continue on that growth trajectory they're on.
Let's talk about a little about the stores a s you said, you mentioned your first store in Century City in September of 2023. You opened now six full stores, including Boston, well, Phoenix, San Diego, L.A., San Francisco. And you have a big New York City flagship opening up in the first half of this year. What kind? of returns are you seeing from those stores, How? are they different from the online piece here? And when you look at it, what is the potential going forward for the stores?
Yeah. Look, we're really excited by what we're seeing in stores a nd as you mentioned, we opened our first one in September 2023 in Century City t hat store is about 3,500 sq ft. The new stores that we've opened for them are quite a bit bigger, more in that kind of 4,000-5,000 sq ft range a nd I think that's one that we see kind of, I think, going forward.
What we are seeing in the larger stores is we're seeing better conversion, right? So for us, being able to bring in more product, more breadth of assortment that they can see online is just allowing the customer to shop more of their assortment a nd kind of we're seeing better conversion there.
For us, we're kind of modeling the stores to have a payback of 18 months or less a nd we're certainly kind of we are on that trajectory. These are stores that we're looking for a revenue perspective, but also to generate good returns and EBITDA for us. We're also seeing that about 30% of the customers coming into the store are new to Princess Polly. So again, helping us in that brand awareness and building that brand kind of from a long-term perspective. So to date, all very successful, very happy with how the stores are performing.
And you mentioned that you're getting customers who don't even know the brand. Are you also seeing kind of this halo effect that we've seen from other online players who've added stores that it increases both the online orders and the store orders at the same locations?
Yeah w e're certainly seeing that uplift, particularly. I would say kind of with Century City now being open for 15 months, we are seeing a nice uplift in the region around that and can measure that because we have so much data ourselves from an online perspective, can measure that very cleanly a nd so we're seeing a nice uplift there i think the other stores, it's early days, but we're expecting to see that performance. And I think it just gives us a lot of confidence on the opportunity we have to continue to scale Princess Polly, but also our other brands in the U.S.
And I guess last question here. You on Princess Polly, you with Nordstrom, you're now physically in Princess Polly is physically in their doors. How does that fit in in terms of stores? How do they complement each other, or how do they add or subtract from each other?
Yeah. So Princess Polly, I would say, is also on the journey with Nordstrom on kind of what should we do from a physical retail perspective. We put them in 20 Nordstroms in October, performing really well. And I think we feel that, like I said, putting our product in front of customers wherever they are once it's in a brand-enhancing way and has the right long-term economics for us is the way to go.
We certainly feel that that customer, the Princess Polly customer, is also in Nordstrom. The product we've put in there is seeing a lot of success s o i think we're going to continue to lean into that relationship. And we feel that kind of across our direct-to-consumer business, our stores, and a very small number of high-quality wholesale partners, there's a real opportunity there.
Great l et's move on to Petal & Pup. So Petal & Pup is a 25-45-year-old woman, originally focused heavily on dresses, but it's become even more of kind of a lifestyle brand h ow? has that customer accepted kind of the expansion beyond just kind of the core dress business?
Yeah i think Petal & Pup very much started as a dress business i t's a huge part of their assortment, and that's what they were first known for, particularly as we brought them into the U.S. I think what's interesting, as you build that test-and-repeat model and build some strength there, it does allow you to move into other categories and try product in other categories.
When you do it on that test-and-repeat model, it builds slowly, right? You're bringing in product each week, seeing the winners and kind of building winner and winner and winner and cohorts on top of each other. We are seeing really good reaction there from customers on the direct-to-consumer side. But also, when we put that product in Nordstrom and in Nordstrom stores, it is selling and selling really well.
Let's talk about that. So you announced this morning that you're going to expand Petal & Pup into all Nordstrom stores for next year. It is rapidly, as to your point, becoming more of a lifestyle brand. Does? down the road, this look like a brand like with Princess Polly that you can add stores to as part of the mix? Let's talk about the Nordstrom expansion l et's talk about, can you think where do you think we can go potentially with stores?
Look, I think there's huge opportunity there i think it's interesting, the success that it's seeing as we put the product in different places i t's been really interesting to us. I would say some of the product that had been around for a while on Petal & Pup, we might have felt was kind of reaching its kind of end of life a s you put it on these new platforms, it's becoming best sellers again and best sellers on these platforms i think that model of just being in front of customers wherever they are is something, as I said, we're going to continue to lean into.
I think there's certainly opportunity for Petal & Pup in stores. I think probably smaller stores at the moment, look, we're very focused on opening more stores for Princess Polly. I think we'll also do another one for Culture Kings, certainly in 2025. I think in 2026 and beyond, there's certainly opportunity there.
So let's talk a little bit about Culture Kings a s you mentioned, it's a leading men's-focused streetwear company. You have one large flagship store here in Las Vegas, and now you have some stores in Australia and New Zealand. This was the last brand that implemented test-and-repeat i believe it did in the back half of last, excuse me, the back half of 2024. What's been the response to that, and how have you gotten the changes you're seeing in the store from rolling out test-and-repeat?
Yeah i think Culture Kings is just this. It's a really differentiated brand i think if anybody, if they have a store, a flagship store in Vegas, it's 13,000 sq ft of retail space t hey've got a recording studio, a bar, a half basketball court. The marketing activations that they do in those stores are just phenomenal, right? For the Formula 1 Grand Prix, we had a McLaren Formula 1 car inside there. Lando Norris, the driver, came through the store.
And we did a collaboration on product with McLaren and Mitchell & Ness that we're rolling out in different places. They've had a boxing rink in the store with world champion fighters working out before their fights t hey've had UFC. They've had different musicians there. It's really just a differentiated brand.
I think for us, we're continuing to kind of roll out that test-and-repeat model at Culture Kings. It takes time, like I said, to kind of build on top of winners. Probably the best example we've seen is the Loiter brand, which is one of our owned brands at Culture Kings.
So about 50% of their revenue comes from owned private label brands that they had. The Loiter brand was up 100% across Australia and the U.S. in Q3 from a sales perspective, up even higher from a gross margin perspective s o we can see that model is applicable on the men's side w e can see we can roll it out at Culture Kings and that we will continue to have success with it.
As you said, it's a unique store.
It's a unique store.
It's got some incredible things to it. What? is the ability to take that kind of large unique piece and move it to other locations potentially, I know that in Australia, you have, I believe, eight or nine of these stores. It's very different there.
The store is a little different.
But how can you take that brand and kind of take it to the next level in terms of stores in the U.S.?
Yeah. Look, I think we certainly feel there's opportunities for more stores in the U.S. Like I said, we will do one next year, or sorry, this year. It won't be the same size and have all the same features. We certainly won't have a bar or recording studio i think the half basketball court and that space to allow us to do marketing activations will certainly be important.
We have a hat wall in Vegas that's pretty amazing. It's got 3,000 different hats on the wall, a lot of them exclusive to us at Culture Kings. I think that hat wall will be a key feature. It's amazing when people walk into that store and pull out their phone to take a photo of that hat wall and share with people, really builds brand awareness for us i think some of those features will be there b ut, look, I think future stores will be more in that 8,000-10,000 sq ft.
But we'll still be stores that for us, obviously, building brand awareness, but also generating sales, generating EBITDA. The Culture Kings store in Vegas is four-wall profitable. It's performing kind of ahead of expectations, and we would expect the same from future stores.
You mentioned about the first-party exclusives t hat's a big push for you to have some of the private label offer exclusive products in Culture Kings stores. How? should we think about the third-party exclusives, like some of the key brands like New Era, UGG, Timberland, How? have you been able to work with them, even though you are to get exclusives there, And what has been the response of your customers to those kinds of items?
That's been interesting i think as we've brought Culture Kings to the U.S., it's a very new brand, a very differentiated brand i think it's taken us time to build in and bring some of those third-party brands to the U.S.
I think, look, we are very happy and proud that Culture Kings is, more than anything, it's a parallel lead. We don't want this brand to be footwear-led. And it's very much also led by their own first-party brands, which is, like I said, about 50% of the business. I think we're able to build good relationships with those party vendors.
And they certainly see that Culture Kings is bringing them a different customer, right? The marketing activations that they were able to do, that we can do with them, allows them to talk to a different customer and also helps them kind of leverage that marketing materials from an online perspective to tell very, very different stories.
Great. Let's switch a little bit and talk about capital allocation. So you have right now a term loan of about $90 million. It's due in September of next year. I guess question A, what are you going to do? But question B, you also are, to your point, expanding stores, including the New York flagship. You need some, I assume you need some capital to do that. How? do all that, how do we think? about capital allocation for, I guess, the next year plus in terms of this in terms of both the business and in terms of the debt due?
Yeah. Look, we're certainly very focused on going after that growth opportunity that we have, right? So I think capital will first go to opening new stores for the brands and going after the growth and profitability opportunity that we have. Look, we're also making and have made great progress over the last couple of years on bringing down our leverage, strengthening our balance sheet w e're going to look to continue to do that.
As you said, the debt is due in September 2026 i think we look to refinance that in probably Q2, Q3 of this year a nd, I think we continue to have an improving story as we think of the kind of that sales growth that we have, as we talked about this morning, 22% in the U.S., our EBITDA in Q4 up 340%, up 75% for the year. I feel like we're going to continue to bring down leverage and execute against the opportunity we have.
Great. Last question since we have a little bit of time here. Australia. Historically, Australia was 40%-45% of sales. As the U.S. has gotten stronger and Australia's kind of stagnated a little bit, it's shrunk to about 30%, if I remember correctly. I guess the question is, is it still a good market for you? What needs to change in terms of that market to see some expansion there? And obviously, it seems that that's not a huge capital allocation, but is there an opportunity to drive higher margin in Australia going forward, Australia and New Zealand going forward?
Yeah i think, look, we are seeing certainly, as we've gone through the year, certainly improving performance in Australia. Princess Polly and Petal & Pup are growing in Australia and generating nice EBITDA there Culture Kings certainly got over-inventoried in 2022 and 2023. It's taken them a while to get through that.
But we are seeing really good progress there and have, as we expected, I think, sales certainly pressured in Australia in Q4, but margins way up. And I think just as we're getting back onto that fresh new product, really seeing that improving performance there, we expect to be back to growth in Australia in 2025 and feel like there is still plenty of opportunity for us there in that market.
Nike. Nike's in Australia. You don't have it in the U.S. I guess the question is, do you want to carry Nike in the U.S.? And I guess the second piece is, how has that impacted your Australian results? And are you seeing Nike start to come back?
Look, it's certainly being an overhang for us in Australia and continues to be a kind of big downward pressure for us there. I do feel that we're starting to see the kind of trough there from a Nike perspective. But look, the overperformance that we're seeing in our own brands will certainly help us get back to growth there. I think long-term, there's a bunch of third-party brands that we would like to have b ut look, we're very focused on a parallel lead, not footwear and our own brands w e very much want to control our own destiny and feel we have a business and brands that we can do that ourselves.
Great. Thank you.
Thank you, Eric. Appreciate it.
Congratulations on your motion there.
Thank you.