a.k.a. Brands Q3 Sales Rise 9.7% as Gross Margin Expands

a.k.a. Brands Holding Corp. (NYSE: AKA) reported higher third-quarter sales and expanded gross and adjusted EBITDA margins, supported by U.S. and international growth and improved full-price selling in its streetwear business. The fashion-brand operator also issued full-year 2026 net sales guidance of $626 million to $632 million and adjusted EBITDA guidance of $29 million to $30 million.

Net sales for the quarter ended September 30 rose 9.7% year over year to $161.3 million. U.S. sales increased 14%, while rest-of-world sales grew 79%; sales in Australia and New Zealand declined 7%.

Gross margin reached 60.1%, up 100 basis points from 59.1% a year earlier. The company attributed the improvement in part to stronger full-price selling in streetwear after completing the transition of that business to a test-and-repeat merchandising model.

Adjusted EBITDA increased 17% to $8.2 million, with the non-GAAP margin rising to 5.1% from 4.8%. On a GAAP basis, however, the company recorded a net loss of $7.7 million, compared with a $5.0 million loss in the prior-year quarter. Adjustments included $5.3 million of distribution-center relocation costs, up from $850,000 a year earlier.

Trailing-12-month active customers, excluding wholesale, increased 8.8% to 4.43 million. Orders rose 12.8% to 2.12 million.

Retail and wholesale expansion

Princess Polly generated growth across online, retail, wholesale and marketplace channels and recorded what the company described as its strongest back-to-school season. U.S. TikTok Shop sales nearly tripled from a year earlier, while the brand launched on TikTok Shop in the U.K. in July.

The brand opened stores in Houston and Orlando during the quarter, bringing its U.S. fleet to 15 locations. a.k.a. Brands expects Princess Polly to have 17 U.S. stores by year-end, with openings planned in Edina, Minnesota, and Frisco, Texas, during the fourth quarter. The company said about 30% of customers across the store fleet are new to the brand.

Princess Polly’s U.K. sales were roughly four times the prior-year level, with its customer count also nearly quadrupling. A dedicated German website is scheduled to launch during the current quarter. The brand also reported strong wholesale demand through Nordstrom and ASOS.

Petal & Pup continued to broaden its wholesale distribution. Sales through Nordstrom and Macy’s grew at double-digit rates, and the brand added 100 boutique accounts representing more than 140 stores over two quarters. It recently launched on Bloomingdales.com, with additional fourth-quarter launches planned at Myer in Australia and Nykaa Fashion in India. Dillard’s is expected to expand the brand to its full store fleet in 2027, while Urban Outfitters and Scheels are also scheduled to begin carrying it that year.

Culture Kings plans to open a 5,000-square-foot store in San Juan, Puerto Rico, during the fourth quarter. The company said the streetwear brand’s full-price, test-and-repeat model is now firmly established and contributed meaningfully to consolidated gross-margin expansion. Sister brand mnml remained among the top five men’s brands on TikTok Shop.

Inventory, cash flow and outlook

Quarter-end inventory declined 1.3% year over year to $95.4 million even as sales increased. Cash and equivalents totaled $15.6 million, while debt fell 8.5% to $101.9 million from $111.3 million a year earlier. Operating cash flow for the first nine months was $16.2 million, compared with $14.7 million in the corresponding 2025 period.

For the fourth quarter, management expects net sales of $172 million to $178 million and adjusted EBITDA of $7 million to $8 million. Full-year capital expenditures are projected at $16 million to $17 million, and weighted-average diluted shares are expected to be about 11 million for both the fourth quarter and full year.

The company’s priorities include refining demand-led merchandising, expanding retail and wholesale distribution, scaling Princess Polly in the U.K. and implementing artificial-intelligence tools across its operations. Management expects AI initiatives to support faster decision-making and margin expansion in coming years, though the company remains early in that implementation.

The outlook is subject to risks including unstable consumer demand, tariffs and duties on imports from China, execution of new stores and international expansion, changing fashion preferences, inventory management, shipping and distribution costs, foreign-exchange movements and the company’s ability to maintain compliance with New York Stock Exchange listing standards. a.k.a. Brands also cautioned that AI implementation carries risks involving data quality, system reliability, regulation and the realization of expected efficiencies.