a.k.a. Brands (NYSE:AKA) reported second-quarter fiscal 2026 net sales that were essentially flat year over year, while adjusted EBITDA rose 16% as the fashion retailer cited higher gross margin, inventory discipline and expanding distribution channels.
Net sales totaled $160.1 million in the quarter, compared with $160.5 million a year earlier. Adjusted EBITDA increased to $8.7 million from $7.5 million, representing the company’s highest quarterly adjusted EBITDA since the second quarter of 2022, according to CFO Kevin Grant. Adjusted EBITDA margin rose 80 basis points to 5.5%.
Regional Performance and Margin Expansion
U.S. net sales increased 2.1% to $110.7 million, while sales in the rest-of-world segment rose 50.5% to $9.6 million. The rest-of-world growth was partly driven by the new U.K. distribution center, which began operating in March. Long said the center’s two-day delivery window has improved customer conversion and created momentum for Princess Polly internationally.
Australia and New Zealand sales declined 13% to $39.8 million. Management attributed the decline to consumer pressure from the macroeconomic environment and a difficult comparison with the prior year, when the company cleared non-go-forward inventory.
Total orders declined 0.5% year over year to 2.04 million, while trailing 12-month active customers, excluding wholesale, increased 4.4% to 4.31 million. Average order value held steady at $78.
Gross margin expanded 360 basis points to 61.1%. Grant said approximately 240 basis points of the increase reflected lower year-over-year tariffs, while the remaining 120 basis points largely came from the streetwear business, where higher full-price selling was partly offset by increased air freight costs.
Management expects third-quarter gross margin of about 59%, reflecting current tariff rates and elevated air freight costs.
Princess Polly Expands Store Footprint
Princess Polly, the company’s largest brand, operated 13 U.S. stores and two Australian locations at the end of the quarter. The company said a 1,000-square-foot pop-up at The Grove in Los Angeles, which opened in May, exceeded expectations and has been converted into a permanent store.
Princess Polly plans to open four additional U.S. stores and one Australian store by the end of 2026. For 2027, the company expects to open as many as 10 additional locations and has already executed five leases in Charlotte, Boca Raton, Nashville, Burlington and Jacksonville.
Long said the company sees potential for at least 100 Princess Polly locations in the U.S. over the longer term. Grant said the company models store investments to generate payback within two years and is seeing performance above that level across the current store fleet.
Management said stores are introducing the brand to new customers while also producing a “halo effect” for online sales. The company expects direct-to-consumer sales to remain larger than store sales even if Princess Polly reaches 100 locations, with wholesale and marketplace sales remaining smaller but meaningful channels.
Princess Polly is also expanding core seasonal assortments in denim, sweats and tops ahead of the back-to-school period, while maintaining its test-and-repeat merchandising model.
Streetwear and Wholesale Initiatives
The company said its streetwear brands, including Culture Kings, mnml, Loiter and Carré, are shifting toward a less promotional, full-price test-and-repeat model. Long said that while Culture Kings sales in Australia fell below expectations, the business contributed meaningfully to gross-margin expansion.
Culture Kings signed a lease for a new Puerto Rico store and is in final negotiations for another location in a major metropolitan market. Both stores are expected to open in the fourth quarter of 2026, marking Culture Kings’ first new U.S. store openings since 2022.
The stores are expected to range from roughly 4,500 to 6,000 square feet, smaller than the company’s Las Vegas flagship. Management said the locations will incorporate lessons from the Las Vegas store and Culture Kings’ newer Brisbane location in Australia, with emphasis on headwear, footwear and the company’s in-house brands.
Meanwhile, Petal & Pup continued to add wholesale and marketplace distribution. Management cited Nordstrom as a productive partner and said tops had become the top-performing category for the brand on Macy’s platform. Petal & Pup also plans to participate in the MAGIC wholesale trade show in Las Vegas and has moved its fall and holiday product launches earlier to extend its second-half selling window.
Balance Sheet and Outlook
a.k.a. Brands ended the quarter with $21.1 million in cash and cash equivalents, compared with $23.1 million a year earlier. Total debt declined 8.1% year over year to $99.9 million, while net leverage improved to 3.37x from 3.5x. Inventory fell 13.6% to $79.9 million.
The company received substantially all of $25.8 million in expected IEEPA tariff refunds during the quarter, which Grant said was reflected in operating cash flow.
Management said third-quarter sales were tracking up high single digits, including double-digit growth in the U.S. quarter to date. The company reiterated its fiscal 2026 outlook:
- Net sales of $625 million to $635 million.
- Adjusted EBITDA of $30 million to $32 million.
- Third-quarter net sales of $160 million to $164 million.
- Third-quarter adjusted EBITDA of $8 million to $8.5 million.
The company expects to record a one-time charge of about $3 million in third-quarter selling expenses tied to a planned distribution center relocation. The charge will be excluded from adjusted EBITDA.
Long also announced that Ilene Eskenazi had stepped down from the board and that Carrie Cassidy had joined as a director. Cassidy previously served as chief people officer at Restoration Hardware and held senior roles at Levi Strauss, Barclays and First Data.
About a.k.a. Brands (NYSE:AKA)
a.k.a. Brands Holding Corp. operates a portfolio of online fashion brands in the United States, Australia, and internationally. The company offers streetwear apparel, dresses, tops, bottoms, shoes, headwear, and accessories through its online stores under the Princess Polly, Petal & Pup, Culture Kings, and mnml brands. It also operates physical stores under the Culture Kings brand. The company was founded in 2018 and is headquartered in San Francisco, California.
