• Net Sales: Approximately $150 million, a 6.4% increase year over year.
• US Net Sales: $100 million, a 19.5% increase over the same period last year.
• Gross Margin: 58%, the highest level achieved in the past three years.
• Adjusted EBITDA: Over $8 million, a 75% increase compared to the same period last year.
• Active Customer Growth: 14% increase year over year, reaching approximately 4.05 million.
• Average Order Value: $81, flat compared to the third quarter last year.
• Selling Expenses: $41.9 million, 27.9% of net sales.
• Marketing Expenses: $19.3 million, 12.9% of net sales.
• General and Administrative Expenses: $27.8 million, 18.6% of net sales.
• Inventory: $106 million, a 6% increase compared to a year ago.
• Cash and Cash Equivalents: $23.1 million at the end of the quarter.
• Store Expansion: Princess Polly opened two new stores in San Diego and Scottsdale.
• Wholesale Expansion: Petal and Pup launched in over 40 Nordstrom stores; Princess Polly in 20 Nordstrom stores.
• Full Year Outlook: Net sales between $567 to $572 million; gross margins of approximately 57%.

• Warning! GuruFocus has detected 4 Warning Signs with AKA.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Net sales growth surpassed expectations, reaching approximately $150 million, a 6.4% increase year over year.
• The US market showed strong performance with a 19.5% increase in net sales compared to the same period last year.
• Active customer base grew by 14% year over year, indicating strong customer traction.
• Gross margin reached 58%, the highest level in the past three years, highlighting operational efficiency.
• Adjusted EBITDA increased by 75% compared to the same period last year, reaching over $8 million.

Negative Points

• Sales in Australia and New Zealand contracted by 12% compared to the third quarter of 2023.
• Selling expenses increased to $41.9 million, up from $36.7 million in the third quarter of 2023.
• General and administrative expenses rose to 18.6% of net sales, partly due to a $2 million legal accrual.
• Inventory levels increased by 6% compared to the previous year, which could indicate potential overstocking risks.
• The company faces potential tariff impacts, with a significant portion of goods sourced from China.

Q & A Highlights

Q: Can you help us understand the guidance for Q4, particularly regarding the balance between Average Order Value (AOV) and order growth? A: We are energized by our recent performance and expect the trends we've seen in Q3 to continue into Q4. We anticipate a slight increase in AOV year over year, with more growth coming from order volume. We feel confident about our inventory quality as we head into the holiday season. - Ciaran Long, Acting CEO and CFO

Q: Are you open to further marketplace and wholesale expansion, especially given the success with Pedal and Pop at Nordstrom? A: Yes, we are pleased with the omni-channel opportunities and the success of Pedal and Pop at Nordstrom. We are open to expanding these initiatives across our brands, including Princess Polly, which is also performing well in new stores and wholesale channels. - Ciaran Long, Acting CEO and CFO

Q: How are you preparing for potential tariffs, and what percentage of your goods are imported from China? A: The majority of our products are sourced from China, and we are working to reduce this exposure. Our test and repeat model allows us to be nimble, and we are prepared to take pricing actions if necessary. We are focused on diversifying our sourcing to mitigate risks. - Ciaran Long, Acting CEO and CFO

Q: How is the wholesale channel performing, and what are your expectations for full-price selling and margins? A: We are seeing strong performance across all channels, including wholesale. Our inventory is performing well, and we are chasing demand across brands and channels. We expect continued strong performance in Q4, similar to recent quarters. - Ciaran Long, Acting CEO and CFO

Q: What have you learned from the Century City store, and how are you applying these insights to new store openings? A: The Century City store has performed well, and we've learned that customers appreciate the in-person experience. New stores are larger, allowing us to showcase more products and categories. We see significant opportunity for Princess Polly to expand its omni-channel presence. - Ciaran Long, Acting CEO and CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.