Can you hear me? All right. Well, hello again. I'm Jay Sole, UBS's Retailing Department Stores and Specialty Softlines Analyst, and welcome again to the 2026 UBS Global Consumer and Retail Conference. Really excited to have a.k.a. Brands here again to talk to us. You know, I have to say that there's a very big fan in my household of Princess Polly, and it's my 15-year-old. She loves it. You know, I think that
We appreciate your 15-year-old, and we appreciate you and your credit card.
That's right.
It's great for us.
There is a really good story here, and I think that we are gonna dive into a little bit, but maybe just, you know, before we kinda dig into some of the nuances of why my kid loves your brand, let's just talk about high level, the business model. Give us a little bit of overview for anybody who might not be totally up to speed on the company, and what you guys do. You know, let's just maybe start there.
Yeah. Thanks for having me. Delighted to be here. Yes a t a.k.a., we're a group of next generation fashion brands, very much focused on that Gen Z Millennial consumer. You know, we started off all of the brands very much direct to consumer. Over the last couple of years, we started bringing the brands into wholesale, into stores, and really just putting product in front of customers wherever they are. Certainly very early days as we get into that, but just really delighted with the traction we're seeing and our ability to engage the customers really across all those different channels.
Okay. Maybe let's talk a little bit more about the brands, 'cause you have a nice portfolio of brands, been cultivating for a while. Maybe just tell us about the brands and also their respective target audiences and maybe the go-to-market strategy for each.
Today we have four brands that we focus on. On the women's side, we have two key brands, Princess Polly, which is about half the portfolio, as we mentioned, grew double-digit growth last year. And has really kind of led the charge of scaling that brand in the U.S. over the last number of years. You know, focused on that 15-25-year-old consumer, being there as they're going out, socializing and being out and about. And very much has been just focused on direct to consumer, and as I said, expanding into stores and wholesale. Our other women's brand, Petal & Pup, another great story. We originally got that brand in Australia, now scaling it in the U.S.
It's now in all Nordstrom stores from a wholesale perspective, on Nordstrom online as well. Seeing great reaction there. On the men's side, we've got two brands, Culture Kings, very much, I would say, retailtainment, that kind of collision of music, sports and fashion. They've a number of first-party brands that they go to market with, as well as kind of key third-party brands in that space. The New Era, NIKE, adidas, people like that. mnml is our fourth brand. Very much on the men's side, kind of, I would say, runway-inspired fashion and bringing it to those.
Got it. Maybe just remind people, like the newest brands in the portfolio, like, you know, the one you just mentioned.
Yeah. The newest brands that we brought are the two men's brands. The mnml brand and Culture Kings. Interestingly, three of the brands that we have, Princess Polly, Petal & Pup, and Culture Kings, started in Australia. We're around in Australia for, you know, maybe 10 years-ish. We were seeing organic demand for those brands here in the U.S., felt an opportunity to buy them, scale them in the US, and so that's really what we're doing and focused on at the moment.
Okay. Maybe just remind us how you guided 2026, and any puts and takes baked into your outlook?
For 2026, from a revenue sales perspective, we guided $625 million-$635 million. From an EBITDA perspective, $27 million-$29 million of EBITDA. I think, look, we are. You know, obviously had a lot going on from a 2025 perspective. Glad to be kind of past all of that. Certainly, tariffs for us were challenging, but made huge progress there. I think now with our ability to, you know, scale retail at Princess Polly from a store perspective, we're in 14 stores at this stage. You know, we've just signed another eight leases and would expect to have four or five o f those open this year for Princess Polly.
We'll continue with Princess Polly and Petal & Pup scaling our relationship with Nordstrom, and see a lot of opportunity there. You know, the Petal & Pup brand is also going into other wholesale opportunities. Von Maur, they are just in this week. We also expect to be in Dillard's in Q3. Seeing just a lot of traction there with that brand. For Culture Kings, it's really scaling those first-party brands that they have.
Okay. Maybe if, you know, you talked about on the fourth quarter call, you mentioned the quarter to date for Q1, the comps are running up mid-single digits. Maybe can you speak to any brand level performance as well as the drivers to that solid trend?
Yeah, it was you know good to see the trend. I think for us, as we went through kind of tariffs last year, we certainly had periods where we were out of stock and kind of chasing inventory and lost a little bit of demand there. I think good to see the traction now as we're kind of past that and Princess Polly certainly leading the way with double-digit growth. Kind of really strong performance there. That coming for us, you know, what we've seen is good strength across the brands, right? And across the channels. And you know, I think coming from just you know feeling like the product is in a really good spot, you know, we're bringing in newness, particularly for that spring/summer season. Customers are reacting really positively to it.
I think, you know, looking forward to kind of continuing to execute against that strategy in 2026.
Got it. You know, I guess just thinking about quarter to date, what's your view of the consumer, you know, both in U.S. and obviously Australia, because there's so much talk out there and some people say there's a K-shaped economy, some people think the consumer is actually pretty strong. If you look at the holiday season, I mean, there was a lot of mid-single digit better comps out there across the mall. What's your view?
Look, we certainly feel we have a resilient consumer, and the consumer, from what we're seeing, is resilient. For us, as you mentioned, we look at across geographies, we look at it across brands, and we now get a really good view into what's going on from a store perspective, what's going on with our wholesale partners, what's going on from an online perspective. You know, I think, look, we're lapping a lot last year, certainly for our consumer with wildfires in L.A., you know, is TikTok on or off and lots of things like that. I would say kind of all the signs we're looking at it from a traffic conversion engagement with the new product we're bringing in, we certainly feel like the consumer is there.
You know, we are not seeing any kind of clear signs, I would say, of distraction. Feel like, look, we're just gonna keep our heads down, keep executing like we have been and, you know, looking forward to a strong year.
Okay. You know, I guess a lot of talk about tax refunds. Think that's important for your consumer historically. Have you seen any, you know, change in trend in your business when tax refunds get distributed? You know, how are you thinking about that issue this year?
Yeah. We certainly look at this fairly closely and try and keep an eye on it. You know, when we see the headlines of how much higher tax refunds are gonna be this year, it certainly gets us excited. You know, we're getting notes from board members and investors saying, "Hey, are you getting some pickup here?
Yeah. Yeah.
I think look, we're trying to keep an eye on it. We're certainly, you know. I wouldn't say operationally we're doing something different. We're not trying to time a change in marketing spend or product drops with kind of changes in when we kind of see refunds come out. I think, look, it probably does just help reinforce that feeling that the consumer is there if the product is right, and just continue to lean into that growth opportunity.
Okay. I mean, it sounds kinda consistent with what other companies said. I don't think anybody's taking a big bet on buying more inventory as if there's this huge stimulus bump coming. It just doesn't feel like that that's the right thing.
Yeah. We're certainly not there. For us, you know, we're very fortunate that our model where we kind of, you know, on our model we are dropping new styles each week, you know, small number of units in those. We test into that inventory. Certainly from an inventory bet perspective, very much staying on that model of, look, let's test, let's find winners, let's repeat into them fast and make sure that we're there for the customer.
I mean, the other thing people are talking about is gas prices. You know, and oil prices are up and maybe, you know, gas prices presumably might follow. How sensitive do you think your consumer is to that kind of thing? Are you seeing any kind of impact from that yet?
Certainly the. You know, in the last couple of weeks we haven't seen an impact. You know, I do reflect on, you know, 2022 back in that kind of, you know, summer of 2022 in that May, June period when, I think, you know, when the headlines were, you know, gas prices are way up when they were $7 a gallon and all the rest of it. I think if it gets that high, you know, I think there's a maybe more of an impact on just the collective noise and conversations that are going out there from an economic perspective as opposed to it kind of affecting our consumer directly.
Okay. I guess, you know, 'cause you have such an interesting consumer, and a consumer a lot of people are focused on just as a trendsetter and just you know an indication of where the culture's going. What does the consumer react to in terms of news? 'Cause on Wall Street, we pay attention to everything. Every headline.
Yeah. We all are.
You know, it drives investors nuts. We've had so many headlines this year and last year, I mean, that, you know, it just doesn't stop. You know, obviously we're talking about a lot of the war in Iran right now. I mean, how much does your customer really change? I mean, sure they are aware of it, but do they change their behavior? Like, my 15-year-old, as much as I try, I don't think she pays that much attention to whether it's Venezuela or Iran or Greenland or what, you know, what's going on with defense companies or mortgage companies or, you know, new Fed chairs or, you know, UAPs or whatever the topic du jour is.
I mean, I don't know if that's representative of the consumer as a total. I mean, how do you think the consumer just responds to news in general and, you know, when it comes to spending and just living your life?
Yeah. I have a 15-year and a 16-year-old. Two girls. I would say like yours, Jay, they are. That's not the news story they're focused on, right? They're on their screen. They are, you know, they're consuming their media, whether it's, you know, TikTok, Instagram, YouTube, and all of those channels. Glad they're focused on their homework as well. You know, there's a lot going on for them.
God bless them for that, you know.
Yeah. You gotta love that. I think, look, for us and our consumer, and I think maybe what's going on recently, but also kind of reflecting on all the macro noise that was going on last year, right? I think the actions we took during the business to kind of transition our supply chain from where we were to kind of where we are now and the diversification. A lot of what we saw was the customer continues to be there. They're engaging with the site. They're looking at our content across the different marketing channels where we're in, and they're consuming it. I would say, look, when the product is good, they're there.
I think, like, it's so interesting, right? Like, I think even talking internally as a team, when you hear sometimes marketing isn't great or having a tough time. It's usually the product isn't just as great as we want it to be, and I think that's really where we're focused. I think once we are continuing to execute against that, I would say from what we are seeing, the customers-
Makes sense. It's encouraging, right? It's good that, you know, people don't get too I think that's a good thing about America is, like, nobody gets, like, too worked up about anything. You know what I mean? It's like, life goes on.
Yeah. Look, I would reflect on the journey we've gone through over the last kind of, you know, gosh, nearly five years being public now and before that, and with the geographies of Australia and the U.S. I certainly feel we have a more resilient consumer in the U.S., and they just get on with it. Right? There's a lot of noise, there's a lot of changes, and they just battle through, and they're amazingly resilient.
That's right. I mean, you know, we have an election year this year, so it's not gonna. Like, the headlines aren't gonna stop, right? You know. It's good that people just. They're focused on fashion. They want fashion.
They're focused on fashion. You know, I think when it speaks to them and makes them feel good and look good and they love it.
I think my fifth grader, she can go to school feeling good about herself, like how she looks, like that's number one, two, and three. That's what matters. All right. Well, I'm gonna get back to sort of talking about some strategies a little bit because you are building a lot of, you know, several channel strategies across DTC, both in websites and stores and wholesale and marketplaces. Maybe what can you tell us about the profit profile of each channel and how you see growth across the channels materializing over the near term and even over the longer term?
I think it's been really interesting for us, right, being pretty much exclusive direct-to-consumer and then getting into these channels really over the last couple of years. I would say first, okay, Culture Kings have had stores for a while, but really, you know, we first put product, I would say, on Nordstrom from a dot-com perspective. We led there with Petal & Pup and saw a fantastic response from a customer perspective. We then went into a test with them for Princess Polly and Petal & Pup and then store-wide last March. You know, over the last 18 months, we started opening stores for Princess Polly. I think what we see is, we certainly, I would say, you know, the geography in the P&L is slightly different.
Obviously, kind of, you know, lower gross margins from a wholesale perspective, a little bit higher gross margins from a store perspective compared to online. Obviously, different selling expense profile. We really focus on, look, what's the, I would say, EBITDA before G&A, before payroll and those kind of structural costs. What profit profile are we there? I would say at the moment, pretty similar. Not really seeing big differences across the three. With that, certainly, you know, gives us a lot of confidence to scale into all of them. Look, I think it's all gonna bring us more profit dollars, which is ultimately the volume of profit dollars is what we're really going after.
I think we're also seeing across all of these new channels, you know, they are bringing more customers into the brands. You know, we're able to measure from a store perspective, about 30% of the people buying from us in stores are new to Princess Polly. We're also seeing new customers from a wholesale perspective. Just from our stores, we're also seeing a nice halo for the online business. I think for us, just look, let's continue to increase the overall market for these brands and lean into them.
I mean, implicit in what you're saying, and tell me if I'm wrong, I'm just gonna put a statement out there. Tell me if I'm wrong, but, you know, it sounds like you feel that there's a very important place for brick-and-mortar retail. You know, I think people forget five years ago, you know, before COVID, everyone was like, "Okay, brick and mortar is dead.
Get out of the mall. The mall's over. Nobody shops there anymore. It's all about e-commerce." Now, I mean, I think at least what we saw in the U.S. this past holiday season is that especially for the young consumer, like they wanna have a social experience. They wanna have a brick-and-mortar experience. Like they wanna touch and feel products. They wanna be with you know, a store representative, brand representative face-to-face. When I hear you saying that, it makes me feel like you probably would agree with that, but you tell me.
I mean. I'd rather have a more nuanced view based on y our understanding rather than my, you know.
I would absolutely agree with it. I would say the real hard confirmation for me, I suppose, and for us as a group is we opened our first store for Princess Polly in the Westfield in L.A., in Century City in L.A., and I would say sitting outside that store, looking at those consumers going in in groups of two, three, four.
You know, girls, friends together, and the excitement they had on, "Look at it. Look, there it is. There it is. Let's get in there." You know, they're in there, like you say, they're touching product, they're feeling product. They love trying it on. One of the first things we learned was we don't have enough changing room in the store, so we had to change that. They just, that in real life experience is a big thing for, just like it's always been historically, it's a big thing for that consumer.
Especially that mall. It's such a beautiful mall. You know what I mean? It's one of the best malls in the world, I think.
It's fantastic. You know, I would say what we're seeing as well, right? I think there's absolutely a place for great malls. People enjoy being in there. They enjoy walking around. I think the mall operators now, you know, have done a lot to create these really great experiences for people, and I think the retail they're putting in there can seem very thoughtful and makes sense, and brands are kind of, you know, working well together and doing well in there.
Right. I mean, it heightens the experience to be in a great environment like that, and then you go and you have an experience with Princess Polly. You remember that great feeling that you had, and you. That's how you start to really, you know, connect with the brand and internalize it, where it sticks with you. It's like, "Yeah, this is something that makes me feel good. I love this.
Absolutely. Look, we're all looking for that, you know, engaged customer that's coming back to you frequently. You know, all of those touch points that we have and our experiences, whether it's measuring that NPS and all those metrics that we look at, it's really to drive customer.
You know, in the U.S. region, the business has grown 25% on a two-year stack, which is pretty awesome. I guess what gives you confidence you can continue to grow in the U.S.?
It is great to be up 25% on the two-year. You know, it's always nice talking about great numbers. I think the execution from the team across all of the brands, be it kind of, you know, opening stores which are new to us, opening those great wholesale partners new to us and really showing up well for our customers there. I think all of that gives us confidence. Also as we are, you know, building into these channels, seeing that we are engaging with new customers across all of the business. I think we realize as well just, you know, we've 13 stores in the U.S. for Princess Polly. That's really early on, right? You know, we have a lot of opportunities to continue to execute against that.
I think all of that, you know, and having a model where, you know, we're very fortunate with pretty much all of our product is product that's exclusive to us. It's our own brands, you know. Margin profile is better. We certainly know as well, we've got a model here that we can lean into, is profitable, and we can get after these expansions.
Okay. I mean, you know, I guess from a lot of investors' perspective, just, you know, having talked to people over the years about your company is that most people have like a frame of reference like, okay, Australia is gonna come here and engage with our, you know, that young super fickle, sensitive customer better than the American brands can. It's like, how. That's a pretty good trick, right? I mean, it's like, sure, there's been Australian. You know, Mel Gibson came here and became, you know, massive superstar and stuff. I mean, it's been done. I mean, obviously, there's a, you know, great connection between Australia and United States. Just talk a little bit about just how you've been able to cut through the noise. You know, it's.
Some people are like, you know, we're very provincial here sometimes, you know, very parochial. Oh, well, in the U.S., your brand's, you know, best or whatever. Clearly, you've obviously figured something out. I mean, what can you say?
Yeah. I think, look, the... Firstly, I would say that test and repeat model that the brands have from a merchandising perspective, right? Where they are looking, you know, bringing in newness every single week. For Princess Polly, you know, it'll do over 100 new styles a week, maybe 150 units deep on each one of those styles. For that consumer that they are looking to talk to, that newness is so engaging for them, right? It's a reason to scroll. It's a reason to go to the site or to look at, you know, Princess Polly across all of the different marketing vehicles. I think that's been fantastic. Also, look, the brand, and I would say Polly in particular, really does a great job from an influencer perspective, right?
They don't really work with big mega influencers that we would all know, right? They're much more focused on those smaller influencers and those influencers with smaller following, very authentic for the customers that they're going to, right? Much more relatable. It gives the ability for the brand to scale more. I would also say, look, from a seasonality perspective, when it comes to that spring, summer season, that has happened in Australia.
We get to see what are the customers down there reacting to w hat are the winners, and that allows us and gives us confidence as we head into the season here from a U.S. perspective to lean into those styles, lean into those winners, and know we can do that with confidence. I would say, look, as you bring in the brands, that's certainly an advantage. Now, we still have a little opportunity with winter. Their idea of winter in Australia is very, very different than ours, but It's good to have opportunities.
Okay. Maybe just going back to the Princess Polly stores, you mentioned the store in Los Angeles. Can you just talk about how the stores in general are performing, and maybe you can just talk about some of the learnings from the stores that have opened more recently and maybe any unit economics kind of information you can share and sort of what are the differences you're seeing between online and in-store shoppers?
Yeah. We opened that, like I mentioned, that first store. Now we're at 13. We just opened one in Australia as well, so kind of 14 overall. I would say, look, all the stores performing well. We've kind of modeled them that we want to have it pay back in two years or less. So good from that perspective. They're in or around the kind of, you know, 3,500-4,500 sq ft from a size perspective. You know, really good productivity. As I mentioned, about 30% of the customer is new to the brand, so great to bring on new customers. All nice profitability, good from a four-wall perspective.
You know, we're very much just looking at what's going through the box as we measure that productivity. I think all of that gives us confidence to continue scaling. We certainly have opportunity as we open each new store to get better and better and better, right? I think it has been interesting as we've gone through the process of bringing a brand like Princess Polly that's, you know, from an online perspective, has a you know a large breadth of SKUs. You can't put all of those in a store. That curation of assortment from you know picking which products you want to go in, when do you want them to go in, it is a new muscle for us.
I would also say from a visual merchandising perspective, you know, how we tell stories online, obviously very different than how you would tell stories in a store environment. All of those things we are. You know, we're learning, we're continuing to improve. I think, you know. I think, look, the stores are doing great, you know, on model from where we want them to be, but we certainly have. You know, high standards, higher expectations, and feel there's a lot of runway, yeah.
Okay. I guess what do you see as the potential from a brick-and-mortar fleet, I guess, overall size for Princess Polly in the U.S.?
Yeah, I think, look, we're very early. I certainly could see a time when Princess Polly would have a 100 stores, you know. You know, for us, it's gonna be that mix of stores, you know, the right wholesale partners that are brand enhancing and have the right economics, and then our own direct-to-consumer business. I think it'll be the blend of the three of those. Obviously, at this stage, you know, we're much more, I would say much more of our volume coming from the direct-to-consumer perspective. We could certainly see a 100 stores for Princess Polly in the U.S.
You know, you mentioned that, you know, with every store there's learnings. You know, when you start with one and you probably feel like you get to three, like, okay, this is the model, right? This is the box that we wanna use, and then you realize, oh, we need more changing rooms, like you mentioned with Los Angeles.
Sometimes I feel like companies get to that 10th store, 15th store, and 20th store, and then it's like you've learned so much, the 20th store is so much different from, like, the 5th store. You have sort of a heterogeneous mix, and you just got started, and it's like, okay, well, wait a minute, what are we gonna do here? How are you gonna manage that? Like, how are you gonna sort of make sure, 'cause is it important to have all the stores be the same or is it okay if some are a little bit different? I mean, how do you think about that growth process?
Yeah. I think it's interesting, the level of learnings that we have now in the In the first 14, right?
Yeah.
I think we are. Look, U.S. is a big country. There are regional differences, you know. Whether it's kind of, the consumer, weather, all that kind of stuff. I think for us, we are not looking to have every store be like every other store.
Right? We know there are differences. We know consumers is different. We should show up for them as they want us to show up. We should listen to the consumer. That's what we're focused on, and make sure we have the product they want in the store. I think, you know, there are certainly learnings that we can apply across all of the stores, right? I would say we're very focused on that from, you know, how we bring on our teams in the store, how we train them, how we want them to talk to our consumer, how we want them to represent Princess Polly. I think there's a lot of focus for us there to make sure we show up right for all of our customers.
Yeah, I think it at this stage, we'll probably be a little bit different from store to store.
Okay, interesting. Maybe can you talk a little bit about the Princess Polly and Petal & Pup partnerships with Nordstrom? Maybe how do you see those partnerships and others evolving over time?
Yeah. Like I mentioned, we first went into Nordstrom online, March of 2024. Saw really great success there with Petal & Pup first. Followed on with Princess Polly. We did a test with them in some stores in kind of October 2024, and then went chain-wide, you know, all 94 doors, I think, with both brands in kind of March of last year. I think just, look, seeing fantastic success and great customer response to both brands. You know, for example, Petal & Pup is in the trend section. You know, they have a really nice presence there, great breadth of product there.
I think we are even, you know, Petal as an example, it's been really interesting for us seeing the how consumers, customers there are reacting probably with, you know, a different mix of assortment than they do with us from an online perspective. You know, Petal is probably you know, from an online perspective, dresses would be their largest category. You know, we're seeing differences in the Nordstrom with Nordstrom. I think for us, that kinda gives us confidence to realize the opportunity we have from a category expansion with that and with Princess Polly, and certainly kind of more opportunities to continue executing against growth.
How much does the results that you see from your DTC channel, especially as you test, inform the wholesaler, you know, the buyers within your wholesale partners about maybe willingness to try a little bit more to expand the assortment and give you a little bit of opportunity in different categories? I mean, how much do they feed off each other?
Yeah. It's been an interesting journey with them on kind of the kind of, I suppose, speed of development, speed of market, and short lead times that we work with from a direct-to-consumer perspective, and the longer lead times that they work with.
You know, we certainly have a few that would ask us for, "Hey, what have you got?" maybe sort of right now, "What have you got coming for fall or later?" Or like, "Hey, we're still planning and designing into summer." You know, it can throw it a little bit. I think it has been interesting, though, to see how engaged they are getting with our development cycle and seeing that they can jump on trends, jump on it quickly, and that our development cycle, supply chain cycle allows them to do that. It's been interesting kind of how they are moving to and trying to move to that faster model.
Interesting. Okay. Maybe I wanna just talk about the stores just in Australia now, because we talked about the U.S. You mentioned you opened the Princess Polly store in Australia. Maybe just tell us a little bit about the potential for more stores in Australia and why you decided to open a store there.
Yeah. I you know, I would say certainly listening to the customers in Australia, they were very vocal about, "How can you keep opening stores in the U.S. we can't get one?" You know, it's been interesting the level of engagement we see at Princess Polly to store opening announcements.
From regional places. "Brilliant. I'll be there. What date?" Then places near to it, what about us? We kind of see that engagement from customers. As I mentioned, Princess Polly started in Australia, so we opened a store for them in Bondi in Sydney last December. Look, have seen a fantastic response to them. Just like you see that excitement of consumers walking up to the store here, and there's Princess Polly. Let's go in there, touch and feel the product. Exactly the same for the Australian consumer. You know, I think there is more opportunity to do stores there. I think, you know, we've got eight stores in Australia for Culture Kings. I could see kind of the same for Princess Polly at some point.
Certainly opportunity there, but I would say kind of for us, very much the focus is on that U.S. as the growth driver.
Right. Okay. That is a bit. Bondi is a beautiful spot where you
It's fantastic. Great mall again.
Yeah. All right. On the fourth quarter call, I wanna just talk about some of the other initiatives you have going on. You mentioned the new international third-party logistics provider for Princess Polly. Maybe, you know, can you speak to your international strategy overall beyond Australia and the opportunity you see for further, you know, growth across the brand portfolio?
As you know, Princess Polly started in Australia, we're bringing to the U.S., scaling it here. We do see demand internationally, right? You know, they come to our website, they buy from, you know, a huge number of countries. I would say, you know, seeing really strong demand, particularly from the U.K. To date, we've been servicing that market from our distribution center in the L.A. region.
You know, longer lead times, longer delivery times, kind of in that four to five day window.
Which obviously impacts conversion, repeat rates. We are putting product into the U.K. market there for them. We'll actually start shipping from that U.K. distribution center next week, which is super exciting. With that, we'll be able to give next day delivery for that U.K. consumer. Obviously a huge kind of jump up in service level there. Also removing a lot of the barriers around, you know, VAT and duties and complications that we were kind of putting in front of them from a conversion perspective. You know, excited to see the difference there, and I think certainly, you know, expect moderate growth there this year and kind of leading the way for us to see kind of what additional expansion opportunities there are for us in kind of, you know, next year and beyond.
Okay. Sounds exciting. All right. I wanna keep moving because I got a couple more things before we run out of time. I wanna just talk about Culture Kings too. I guess what's changed over the past year at that business, and what are some of the opportunities you see for 2026 and longer term?
Yeah. Culture Kings is our predominantly men's business. It focuses on streetwear mix of about 50% of their business is third-party brands that they have and about 50% from their own first-party brands. You know, five or six brands that really matter to them. We brought in some new leadership in Australia last year and also from a global design perspective. For us, really, we're kind of, you know, again, back to let's get the product and each of those individual own brands in a better shape as we look to scale them in the U.S. Look, the team has done a phenomenal job of really, you know, getting the aesthetic on each one of those first-party brands in a much tighter way, you know, inventory in a much better way.
As we kind of launch some of those new products in Q4, saw much better, you know, customer response, much better style productivity, much better sell-through. Super excited and, you know, all part of getting the Culture Kings and really the men's businesses on that same test and repeat model that we had the women's businesses on. I think for us, you know, being able to drop product that you can test every week, seeing how they respond to news, you're not taking big, huge inventory swings. But when you have a winner, you can really chase into them.
We certainly see how powerful that model is, and we're just very, very focused on getting Culture Kings onto them.
Okay. Makes sense. I mean, tell us about the relocated and newly renovated Culture Kings store in Brisbane.
Yeah. We've had eight stores in Australia for a while, and the stores there were about kind of, you know, I think of them in the 8,000-9,000 sq ft size, and a lot of kind of, you know, retailtainment aspects to that. I think for us, you know, we wanted to figure out. We have a great store for Culture Kings in Las Vegas, but it's a big store.
Right? It's about 13,000 sq ft of retail space, as well as a basketball court, a DJ booth, recording studio. There's a fully licensed bar in there. As we think about that, it's fantastic for the first store and really put Culture Kings on the map. You know, that's not something we're gonna replicate across the U.S., right?
For us, you know, it was great that we were able to roll out quickly and test a new, you know, design concept in Australia. It's in that kind of 5,000 sq ft size. you know, we're able to keep not every feature, but a lot of the key retailtainment features. look, it's getting us to be more and more choiceful as we decide on what brands and what products for brands we put into the stores. I think ultimately then is a model that we can roll out with much more confidence in the U.S.
Okay. Two more topics. I wanna ask you about AI, and then we'll talk a little bit about tariffs at the end, if we have time. AI, first big picture question. On a scale of 0 to 10, where a zero is like, hey, AI is completely overhyped and, you know, just ridiculous. Ten is like, this is a game changer for our business in terms of efficiencies and being able to do sales better, marketing better, operations better, design better, everything better, test better. Where are you on this scale?
I'm probably up seven, maybe even eight.
Really?
Yeah, yeah. I think it's interesting. I think we talked about it maybe 12 months ago, and I was kinda saying, "Look, there's some interesting stuff, but I don't see anything kind of ground-breaking huge." I think the progress of change probably over the last 12 months has been phenomenal. What we are now seeing of the business being able to do is, I think we're getting a real view into, yes, there are big opportunities here, right? You know, we're very fortunate with the technology stack we have, right? We predominantly sit on Shopify, right? In the ecosystem of software that works with that.
For us, it's a very flexible technology. We can try things really quickly. We can try different things across each brand. If it's working, everybody uses it. If it's not, if something we tried once and we just get on with it. We're also very fortunate that we have all of our data across all of the brands, all of the metrics we want from a customer perspective, merchandising, operations, sourcing, supply chain, all in one area, all in one database. Now we're able to let the different LLMs engage with all of that data and their team engage.
I think what's been really interesting for us is just I would say the kind of unlocking creativity say in different teams for us on how they're looking at their business, how they're finding opportunities to ultimately run.
Is there an aha moment over the last year or some maybe anecdote you can share with us or something like that around like, "Whoa, this is big"?
I think some of the interesting ones were, you know, we were recently just able to really quickly look at imagery on our website, the photography that we use, models, poses, settings, lighting, and product description. Using those and, you know, unit sales, unit velocity sales across all products to pick out trends on why we have slightly higher return rates on some products versus-
Got it.
Super interesting, right? Like, look, we're fortunate to have a really low return rate across the group. It's only about 18%. But it's just an interesting question that somebody looked at and, you know, you're asking it to see if you can pick a trend. It's being. It's. Look, it's not perfect, right? It's not. But it's just, I would say, setting off further kind of areas that you can look at, interesting kind of aspects that are standing out to it. Look, as an individual, you're not gonna be able to consume that level of data and make those kind of assumptions, but it can. That was probably it.
Well, I mean, that makes sense because obviously inventory efficiency is probably any apparel company's biggest opportunity, you know, in general.
No doubt. That's where we're focused on the unlock, right? I would say the model we have is test and repeat is all around that and trying to differentiate ourselves there and unlock more opportunity there. I think we certainly feel that this technology that's you know still coming on and coming along is going to lead to more opportunities.
I guess I'll ask you one more question about this, then we'll probably run out of time. I think from a, you know, an investor perspective, everybody wants to understand the ROI, right? Hey, what does it mean for sales and margins 'cause you're doing this AI stuff? I think companies are a little bit hesitant to give that information. I think part of it because it's not necessarily like a do A, get B type of situation. To the extent you can share with us sort of like internally, are you able to measure return from using AI or are you able to sort of see the difference in, you know, the progress financially the company's making from AI? I guess the second part of that is where are you on the journey?
I mean, obviously, I think you've said seven, right, in terms of excitement. Rather, you know, it's not just hype. It's there's something real here. I mean, are you in the very beginning of tapping into the, you know, getting the benefits that can lead to better, you know, profits overall, or is it more like you've already done a lot? Maybe you're seventh or eighth inning and, you know, toward the end of the game essentially and, you know.
I'd say we're very early today, right? We are starting to see where it's helping us build a better business. It's helping us, and I think do it probably in a quicker way, you know. I think particularly for us at the moment, probably pointing out to us little kind of pockets of where we are, you know, wasting money or could be more efficient or doing something better. I think whether that's on, you know, I would say promotion cadence, markdown management, I think they're for us the big opportunity. Look, there are, I think, there are little bits of that all over the business, and I think we're super excited about what I can-
Is it fair to say, as a company with lots of growth potential in front of it, you'd rather take those savings and reinvest it in growth rather than sort of say, "Oh, let's just boost our margins and show Wall Street like, you know, a little bit more earnings growth"?
Absolutely. Look, we're in it for the long run. Right? We know our profit is really gonna come from scaling these brands, right? We have a model where we can scale them profitably. I think, look, we are focused on let's, you know, balance growth and profitability has been a big thing for us, but we are very focused on getting our fair growth.
Got it. I guess very I said last one, but this is the very last one. You know, Shopify sounds like a great platform because they probably give you an opportunity to sort of test things and try things. But I mean, do you need to, you know, leverage, you know, Anthropic or some of these other companies that are out there that are offering separate things, or you can really work with a great platform like Shopify to sort of, you know, experiment and see what, you know, what you can do?
Yeah. I think that Shopify as a core platform is something we can certainly continue to work with. I think there are little add-ons to it that we'll continue to evaluate, and when they work, we'll integrate them.
Right. Shopify can help you with your customer experience online, but in terms of maybe, you know, looking at stores or testing product or inventory, that has to be something separate. I mean, they can't probably help you with that.
That is absolutely something separate. I think the big thing there for us is having your own data, having it connected, having it in place. You got a lot of choices.
right. The trick is just to put all that data in a platform that can make sense of it, to give you tools that you can make decisions and kinda choose stuff, right? That's what Palantir does apparently for the Army, so.
Yeah.
Okay. All right. Well, we got to the end of the time. That was great. I could keep asking questions, but I think it's been a good day, so we'll stop there. Thank you so much a.k.a. Brands, everybody.