a.k.a. Brands (NYSE:AKA) reported a stronger-than-expected start to fiscal 2026, with first-quarter net sales rising 3% to $132.5 million and Adjusted EBITDA increasing to $5.1 million, management said on the company’s earnings call.
Chief Executive Officer Ciaran Long said the results reflected “significant gross margin expansion year-over-year” as changes to the company’s merchandising, sourcing and inventory model began to show up in financial performance. Excluding one-time items related to tariffs and strategic charges tied primarily to legacy streetwear inventory, gross margin reached 59%, up about 180 basis points from a year earlier.
“We view this as the single clearest proof point that the structural changes are working,” Long said, referring in particular to margin gains in the company’s streetwear brands.
Margins Improve as Inventory Reset Takes Hold
Chief Financial Officer Kevin Grant said first-quarter Adjusted EBITDA rose from $2.7 million a year earlier, with Adjusted EBITDA margin improving 180 basis points to 3.9%. He said underlying gross margin expansion was driven by improved inventory discipline, stronger full-price sell-through and the continued rollout of the company’s test-and-repeat model, especially in streetwear.
The company also recorded several tariff- and inventory-related items in the quarter. Grant said a.k.a. Brands paid $25.8 million in IEEPA tariffs since their inception, including $18.6 million that flowed through cost of goods sold and $7.2 million capitalized in inventory. Following a Supreme Court decision overturning the tariffs and the company’s refund submission to U.S. Customs and Border Protection, a.k.a. Brands recognized the expected benefit as a receivable in the quarter. Grant said the company had already received about $6 million of the expected $25.8 million refund as of the call.
At the same time, the company wrote off $12 million of legacy streetwear inventory, which Grant described as a one-time reset tied to the completion of the move to a test-and-repeat model.
Inventory ended the quarter at $67.7 million, down 28% from $94.4 million a year earlier. Total debt was $109.6 million, down from $119.9 million a year ago, while cash and cash equivalents totaled $12.9 million.
Princess Polly Leads Retail and Social Commerce Expansion
Long said Princess Polly, the company’s largest brand, delivered a strong quarter, supported by weekly product newness, disciplined test-and-repeat execution and strong full-price sell-through. Dresses remained a key volume driver, while swim was a standout category heading into the second quarter. Long also highlighted traction in basics and knits, which he said were helping expand the brand’s share of wardrobe.
Seasonal events including Valentine’s Day, festival and graduation helped drive growth, with graduation delivering record performance across sales, inventory turns and margins, according to Long.
Princess Polly continued to scale its TikTok presence during the quarter, with the brand going live up to 100 hours per week and leveraging thousands of affiliate and creator videos per month. Long said February and March were both record months for the brand on TikTok, and TikTok Shop continued to drive new customer acquisition efficiently.
The company is also expanding Princess Polly’s physical retail footprint. Long said the brand operates 13 stores in the U.S. and opened its first Australian store at Bondi Beach in December. Princess Polly plans to open a 1,000-square-foot pop-up at The Grove in Los Angeles running from the end of May through July. The company has eight new U.S. store leases fully executed, with four expected to open by year-end, and plans another Australian store at Pacific Fair in the second half of the year.
Petal & Pup Builds Wholesale Momentum
Petal & Pup continued to gain traction with its core customer, Long said, with event dressing remaining the highest-growth category across regions and channels. He said customers are also moving into additional categories as the brand expands its separates offering, with tops and bottoms representing a higher share of the mix.
Wholesale remained a key growth area. Long said Nordstrom performance stayed strong, with Petal & Pup established in the retailer’s trend section across dresses and casual styles. Von Maur launched in February and was already chasing top-performing styles after strong initial sell-through. Dillard’s completed its first store test shipment in the first quarter and is expected to go live across nine locations in the second quarter.
Petal & Pup also opened a new Los Angeles showroom during March market week and secured 13 new specialty accounts within the first month, ranging from independent boutiques to multi-location retailers.
Streetwear Brands Show Margin Progress
Long said Culture Kings’ transition has been a multiyear strategic priority, including rebuilding the in-house brand portfolio, resetting inventory, improving product quality and moving to test-and-repeat merchandising. He said that work is now translating into measurable results, with full-price mix and gross margin improving materially year over year.
Culture Kings’ in-house brands including Loiter, 73Studio, Carré and Saint Morta were areas of focus. Long said 73Studio had a strong quarter, helped by Marvel and Xbox launches, while Loiter’s Marvel collection resonated with customers. The company is also planning future releases tied to Spider-Man and Avengers.
Brand activations remained important for traffic and engagement. During the quarter, the company executed activations tied to NBA All-Star Weekend, Formula One’s Melbourne Grand Prix through a partnership with Atlassian Williams Racing, and a WWE collaboration tied to WrestleMania in Las Vegas.
Long said the relocated Brisbane store in Australia is now the strongest-performing location in the country’s fleet, with gross margin, full-price mix and traffic all improving materially year over year. The company is pursuing a second U.S. Culture Kings store using lessons from the Brisbane location.
Guidance Maintained Despite Consumer and Cost Pressures
a.k.a. Brands maintained its fiscal 2026 outlook for net sales of $625 million to $635 million and Adjusted EBITDA of $30 million to $32 million. For the second quarter, the company expects low-single-digit net sales growth, Adjusted EBITDA of $8.5 million to $9 million and gross margin around 60%.
Grant said the full-year outlook assumes tariff rates return to levels discussed before the Supreme Court ruling in the back half of the year. He also said second-quarter gross margin reflects the tariff refund taking effect, current Section 122 tariffs and some inbound freight headwinds.
During the question-and-answer session, Long said the company is seeing “some pressure on the consumer” in both the U.S. and Australia, with Australia somewhat more pressured. He said the company saw some softness late in March and into April, but improvement in May.
Long also said energy-related cost pressure has been limited, mostly affecting synthetic materials, which he described as a small percentage of the business. Air freight costs have increased, but he said those costs are included in the company’s guidance.
Management said the company remains focused on attracting and retaining customers, expanding brand awareness through stores and wholesale partners, and strengthening operations. Long also noted that a.k.a. Brands is increasing investment in artificial intelligence across product imagery, marketing efficiency and inventory optimization, with expectations that the initiatives will contribute to margin expansion over time.
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.
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