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spk01: Greetings and welcome to the AKA Brands Holding Corp second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Casey White. Thank you. You may begin.
spk04: Good afternoon. Good afternoon. Thank you for joining AKA Brands' second quarter fiscal 2024 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call is Kieron Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements, which refers to expectations, projections, and other characterizations of future events. including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will contain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margins. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I'll turn the call over to Kieran.
spk06: Thanks, Casey. Good afternoon, everyone, and thanks for joining our second quarter earnings call. Before I review a few key highlights from the quarter, I would like to again take a moment to thank our team for their continued commitment to building on our portfolio of next generation brands for the next generation of consumers. This was another quarter in which the team's agility and flexibility in executing our strategic priorities while keeping our customers at the center of every decision we make enabled us to deliver strong quarter top line and operating results that exceeded our expectations. I continue to be very confident in our team's ability to execute and in the many profitable future growth opportunities we see for AKA Brands to expand our brand portfolio reach and total addressable markets. Before I go through the results in more detail, let me share a few highlights from the second quarter. Net sales far exceeded the high end of our guidance as we achieved year-over-year growth of more than 9%. Momentum in our US business meaningfully accelerated with year-over-year net sales growth of more than 19%. We delivered a strong gross margin of 57.7%, up 80 basis points from the prior year, which combined with marketing expense leverage of 120 basis points contributed to adjusted EBITDA of $8 million, a year-over-year increase of 44%, exceeding the high end of our guidance. Despite a late-in-the-quarter build of inventory as we chased into demand, we generated $3.5 million of operating cash flow. We registered another strong quarter of active customer growth, up 11.7% on a trading 12-month basis. We ended the quarter with net debt down 13% from the prior year and down 20% in a two-year stack. In addition to planned new Princess Polly store openings in Scottsdale's Fashion Square and on Newbury Street in Boston and in the Fashion Valley Mall in San Diego, we signed two new leases for additional locations in Irvine and Santa Clara, California, which we expect will bring the Princess Polly physical presence to six locations by year end. and with more expected to come in 2025 and beyond. Petal & Pup's expanded omnichannel presence has exceeded expectations, setting the stage for continued growth and brand expansion. Leveraging the successful experience of Petal & Pup, our streetwear brand Minimal launched a small test on Nordstrom.com. And lastly, Country Kings US delivered another strong quarter of double-digit net sales growth on top of strong results last year. Turning now to more details on the second quarter, we generated 149 million of net sales, a 10% constant currency increase over last year, far exceeding our expectations. The momentum in the U.S. business accelerated, with net sales growing 19.3% over the prior year period, reaching 95 million and accounting for 64% of net sales for the quarter, up from 54% last year. We remain very pleased by the accelerated strength we are seeing in the U.S. region, which remains our fastest growing and most profitable growth region. Our success remains broad-based with strong product acceptance across our brands, coupled with growing brand awareness and attracting many new customers. Our Australian New Zealand region results sequentially improved, ending the period with a net sales year-over-year contraction of only 5%. With a combination of reduced inventories in the region and our shift to a test and repeat merchandising strategy, we expect to experience second half year-over-year gross margin expansion. And as I mentioned, our operating performance well exceeded the high end of our expectations as we registered adjusted EBITDA of $8 million, a year-over-year increase of 44%. Looking at our first half performance, our momentum is accelerating and our results are being fueled by the transformational work we started in 2023. We registered first half year-over-year net sales growth of 3.6% with strong flow-through, resulting in EBITDA growth of 15%. Although there is much work ahead of us, with our strong first half results, I'm even more confident in the opportunity we see in the US to expand our brand portfolio and total addressable market. We are committed to our strategic priorities as we continue to build on our portfolio of next generation brands for the next generation of consumers. Just as in our first quarter call, I would take a moment to reiterate our strategic operating framework for 2024, including our three key strategic priorities. Priority number one, retain existing and attract new customers. Over the last 12 months, we added 420,000 new customers, which included the addition of 180,000 new customers during the second quarter, resulting in our active customers for the quarter increasing by nearly 12% over the prior year. As our teams remain disciplined and adhering to our test and repeat merchandising approach and staying close to our customers, our level of product newness has never been higher. Our assortments are strongly resonating enabling a greater level of full price selling which is fueling expanded gross margin results we're very pleased with the quality and composition of our inventory and marketing efforts are yielding strong return on investment positioning as well for continued active customer growth across our brand portfolio priority number two remain committed to showing up for our customers wherever they choose to shop with us in addition that To enhancing our online channels, we continue to test and expand our omnichannel strategies, including experiential stores, wholesale, and marketplaces. I'll touch on each of our omnichannel strategies by brand momentarily, but I'm pleased to report that we are seeing success across all channels of distribution. Another clear signal that our brands are meaningfully under-penetrated in the U.S. market. As our awareness increases, we continue to expand our total addressable market. Priority number three, continue to streamline our operations to deliver financial benefits. The strong second quarter flow through in which our net sales growth of 9.5% contributed to adjusted EBITDA growth of 44% as compared to the same period in the prior year, showcases our ability to drive outsized profitability. is a direct result of the transformational work we started in 2023, as well as the instilled culture to always look for ways to improve overall efficiencies, share best practices, and leverage the AKA platform to drive additional improvements in our results. Now let me share some highlights from our brands. Our largest brand, Princess Polly, which focuses on trend-based fashion targeting Gen Z and millennium women, posted another strong quarter of growth. Princess Polly's strong second quarter performance was broad-based with particular strength in dresses. We're also very pleased with the brand's category expansion efforts, including our newest product launches in sleepwear, loungewear, and activewear. And just in time for back to college, Princess Polly is now offering an assortment of everyday essentials, such as fleece hoodies, quarter zip sweatshirts, shorts, and more. I am also pleased to report that approximately 35% of the brand's new styles were made with lower environmental impact materials, which is up from 30% a year ago. Staying close to our customers, focusing on product innovation, and leveraging our test and repeat model to provide fresh, new, and affordable merchandise daily remain key brand tenants of the Princess Polly's DNA, which continues to fuel a high level of product newness and a higher hit rate on winners. Shifting to physical stores. We believe stores serve as a powerful customer acquisition tool and provide customers unique and immersive brand experience, creating a halo effect beyond each store, expanding our surrounding digital reach. Princess Polly's first store opening in Century City, LA back in September 2023 continues to perform strongly. We're excited for the five new Princess Polly store openings expected to occur in the second half of 2024. with two scheduled in the third quarter and three in the fourth quarter, all in time for the holiday season. The team remains focused on developing and executing unique in-store immersive brand experiences, engaging influencers, college ambassadors, and customers all designed to expand Princess Polly's brand awareness and attract new default customers to the brand. Petal & Puppets are other women's fashion brands focused on elevated trends, and event-based fashion for all of the little and big moments in her life, with more than 70% of the customers between the age of 25 and 34. Petal & Pop's second quarter performance was outstanding, with particular acceleration and strength across the brand's omnichannel efforts. Petal & Pop is now being offered on Nordstrom.com, Macy's.com, and Target.com, and the brand saw significant uptake in new-to-file customers in the second quarter, in part fueled by the fact that a high percentage of their omnichannel customers are first-time brand shoppers, which bodes well for continued brand growth. We remain very pleased with Petal's launch of Modern Romance, a wedding guest collection, and the May launch of Euro Diaries collection, with many styles selling out in the first few weeks. Although dresses represent the dominant portion of the category mix, the growing appeal of Petal & Pop as a lifestyle brand sets the stage for expanded product tests in the near future that could further accelerate the brand reach, whitening the total addressable market. Turning now to our streetwear brands. As I mentioned earlier, Culture Kings US delivered another quarter of strong double digit net sales growth on top of strong results last year. We remain thrilled with the consistent strong sales performance and forward profitability in the US flagship Las Vegas location, as well as the growth in the online business. Culture Kings is disrupting the streetwear market. There is simply nothing like the immersive experience of our Culture Kings store and our offerings across channel span a curated assortment from over 100 leading third-party streetwear brands, as well as a large and growing portfolio of in-house design brands and exclusive products that embody the relationship between music sports arts and fashion our first party brands such as loiter american thrift and minimal continue to be top performance with first party brands accounting for more than 50 percent of total culture kings u.s sales on the engagement front culture kings developed and hosted another phenomenal lineup of events in the second quarter ahead of edc weekend one of the largest electronic music festivals in the world, CK teamed up with DJ Matroda and Insomniac Records for an incredible live DJ set on the ground floor of the Las Vegas flagship store. For the milestone UFC 300 event, CK launched an exclusive capsule collection in collaboration with UFC and also created a one-of-a-kind varsity jacket with celebrity designer Jeff Hamilton. Culture Kings also teamed up again with Lyrical Lemonade's Summer Smash Festival in Chicago with another limited edition merchandise collaboration. Going deeper on Minimal, Minimal's spring collection achieved record-breaking seasonal sales, highlighting Minimal's ability to swiftly identify and deliver on emerging customer demands and bring fresh ideas to market faster than traditional brands. Following its successful spring and summer test phase with retailer DTLR, Minimal Effective expands to all of their locations in August, representing a major step for Minimal's wholesale strategy. As I mentioned, Minimal launched on Nordstrom.com in July with a limited number of SKUs. Initial selling is strong and we look forward to potentially expanding the SKU availability over the coming quarters. We remain bullish on our streetwear brand's long-term growth potential in the U.S. as well as globally. Now, I'll provide more detail on the P&L before taking your questions. For the second quarter, as I mentioned, net sales increased 9.5% to $149 million and 10.1% on a constant currency basis compared to the same period last year, driven by strength in our U.S. business. in which net sales increased 19.3% compared to the second quarter of last year. We also experienced meaningfully sequential improvements as our brands gained momentum in the US. While we saw softer sales in Australia and New Zealand as compared to the second quarter of 2023, ending down 5% for the period, sales trends generated significant sequential improvement. Net sales in the rest of the world declined 1.5% as compared to the second quarter of last year. Total orders for the second quarter were 1.9 million, increasing 16.4% as opposed to the second quarter last year. In the U.S., we saw order growth of 31%, driven by the impact of our U.S. stores and omni-channel initiatives, which was offset by lower demand in the Australian New Zealand region where orders declined 7%. As I mentioned, our training 12-month active customer count rose to 4 million by the end of the second quarter, a 12% increase compared to a year ago. Our second quarter average order value was $78, down 4.9% compared to the second quarter last year, due to softer sales in Australia and New Zealand, and the actions we've taken to improve our inventory position at Culture Kings in Australia and move them to our test and repeat merchandising model. Turning now to profitability, gross margin expanded 80 basis points in the second quarter to 57.7% compared to 56.9% in the same period last year, driven by lower air freight costs and strong full price selling. This was slightly offset by the channel mix shift to wholesale and planned promotions at Culture Kings Australia. Selling expenses were 41.2 million compared to $35.9 million in the second quarter of 2023. Selling expenses were 27.7% of net sales, compared to 26.4% a year ago, due primarily to the impact from growing marketplace initiatives and additional stores. Marketing expenses in the quarter were flat year over year. As a percentage of net sales, marketing expenses leveraged 120 basis points to 12.3%, compared to 13.5% in the second quarter of 2023. We experienced enhanced marketing efficiencies driven by strong performance at Petal & Pup, Princess Polly and Culture Kings US, as well as leverage from higher sales at wholesale and in stores. General and administrative expenses were 25.9 million compared to 24.2 million in the second quarter of 2023. As a percentage of net sales, G&A expenses decreased to 17.4% from 17.8% in the second quarter of last year due to leverage from higher net sales. We delivered adjusted EBITDA of $8 million compared to $5.6 million in the same period last year ahead of expectations. Adjusted EBITDA margin for the second quarter of 2024 increased 130 basis points to 5.4% compared to 4.1% in the same period last year. Turning now to the balance sheet. We ended the quarter with 25.5 million in cash and cash equivalents, debt totaling 106.9 million at the end of the quarter compared to 120 million a year ago. On inventory, we ended the quarter with 107 million in inventory, flat with a year ago during the quarter we made continued progress reducing our culture kings inventory levels and we and we are comfortable with our inventory levels as our investments are in our strongest trending brands a quick update on our stock repurchase program in the second quarter we repurchased 11 046 shares for a total cost of approximately a hundred thousand as of the end of the quarter we have 1.7 million remaining in our share repurchase authorization. Now turning to our outlook for 2024. Given the strength in our first half results, we're adjusting our outlook and now expect to deliver between 560 to 565 million in net sales for the full year. For the year, we expect gross margin between 56 and 57%, and we anticipate selling expenses to be approximately 27% of net sales and marketing expenses of approximately 12.5%. We expect G&A expense between 100 million and 110 million for the full year 2024. As a reminder, as we continue to expand into other channels such as wholesale and marketplace, we expect it will impact the composition of our expenses. While the EBITDA contributions are similar to our core business, our wholesale and marketplace initiatives have lower gross margin with a corresponding benefit in selling and marketing expenses. We expect to see more of an impact in the back half of 2024 as these channels grow. For the year, we now expect adjusted EBITDA of between 20 million and 22 million, weighted average diluted share count of 10.6 million, capital of expenditures between 12 and 14 million, and an effective tax rate of 10%. For the third quarter, we expect net sales between 141 million and 145 million, and adjusted EBITDA of between six and seven million. In summary, as you've heard, we delivered a very strong quarter with double digit constant currency top line growth with healthy flow through resulting in EBITDA growth of 44% over the prior year period. The transformational work we started in 2023, combined with our culture of innovation is driving meaningful improvement across the business. We remain committed to building our portfolio of next generation brands for the next generation of consumers, while staying relentlessly focused on executing our strategic priorities to enable AKA brands to fuel consistent, long-term profitable growth, capitalizing on the tremendous opportunity we see to expand our total addressable market. We operate with the mindset of continuous improvement. So while we recognize there is more work ahead of us, we're encouraged and motivated by the momentum in our business, and I'm excited to continue executing our strategies as we head into the back half of the year. Now, I will open up the call to your questions.
spk01: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time. One moment while we poll for the first question. Thank you. The first question comes from Randy Koenig with Jefferies. Please proceed.
spk07: Yeah, thanks a lot, and good evening. Karan, you guys are seeing a lot of success with the multi-channel approach you've been undertaking, whether it's stores, wholesale, and obviously DTC with e-comm. I guess my question is, if you kind of think about over the next few years, let's say the next three to five years, how do you think about the optimal channel kind of mix in the business if we were to think through over those next few years? It'd be super helpful. Thanks.
spk06: Yeah. Thanks, Randy. Appreciate the question. You know, I think, yeah, we are seeing just really nice success. I think we're really happy to see, you know, the progress and the results from the transformational work we really started, I suppose, over the last couple of years, you know, with overall sales up 9.5% and the US up 19%. You know, I think as we think about, you know, those different channels, I feel, you know, we really look to them you know, if there are opportunities to elevate our brands and if the economics are at the level we expect them to be, we're happy to lean into those channels. You know, if it's missing one of those two things, we won't. I think, you know, we've learned a lot from the tests that we've done over the last, you know, 12 or 18 months, I think. And, you know, with it, we see, you know, just tremendous opportunities across the brands, I think, you know, The Culture King store in Vegas is doing really well. The Poly store is ahead of expectations on sales and profits. Petal & Pop has just a really strong performance as they have leaned into some of these wholesale opportunities. I think, look, we're going to continue to drive into those. I think long term, we certainly feel that we're still going to be predominantly a direct-to-consumer business. But we certainly see opportunities for us to continue with all of the brands kind of expanding into these omnichannel opportunities and just continuing to lean into kind of, you know, really strong, profitable growth across each of the brands.
spk07: Super helpful. My last question is, you know, when we look at the landscape out there in apparel, you know, one thing that is starting to kind of become more clear is the the fashion-based businesses are almost starting to come back, your business, Revolve, et cetera, while we're starting to see continued deceleration in these leisure, athletic-type businesses. So it looks like there's a real fashion shift happening in a big way. Are you seeing that? Is that partly why that's kind of becoming more of a tailwind to your business in addition to, just better product, better execution, et cetera. Just, you know, your thoughts on the kind of the fashion environment would be super helpful as well.
spk06: Yeah, thanks, Randy. Look, I think we're very fortunate that we have four great brands that people love. I think within that, you know, for each of the brands, you know, pretty much all of the product that they have is proprietary and, you know, and exclusive to us. So I think one of the big advantages that we have is just, you know, or product just being exclusive. I think then just the kind of the power of the test and repeat model, I think, you know, we clearly see it in the business. We clearly see it as brands. And, you know, when you're able to stay so close to being on trend, you can really lean into what you see is just being, you know, really resonating with customers. And you can do that from a merch perspective, but also has huge benefits as you look from a marketing perspective as well. And I think, look, we see that resonating with our customers, with our active customers up, you know, 12% year over year, nearly 420,000 customers. I think we've seen broad-based kind of success really, I would say, across the categories, Randy. Certainly for Princess Polly, Petal and Puff, they are both very strong in dresses, and we certainly saw a lot of success there in Q2. But also really happy with the new category expansion Princess Polly has done in the first quarter and is continuing to do into loungewear, sleepwear, other areas. I think we feel there's a lot of opportunities. And I think just leveraging on that test and repeat model, really listening to the customer is going to continue to pay advantages in the future.
spk07: Super helpful. Thanks so much.
spk01: The next question comes from Eric Beder with FCC Research. Please proceed.
spk00: Good afternoon. Congratulations on the upside for the quarter.
spk05: Thanks, Eric.
spk00: I want to talk about Culture Kings. So, we are entering the period now where you're going to be shifting that business over to the test and repeat mode. How should we be thinking about the opportunities for that going forward? And how does that work in respect with the exclusives and the first and third party providers to the brand?
spk06: Yeah, sure. Thanks, Eric. Yeah, I think, look, we're really happy with the progress that Country Kings continues to make. And as I talked in my prepared remarks, it continues to be up double digits in the U.S. on top of strong results last year. and we see tremendous opportunity for it. You know, it is, we're making nice progress moving their first party brands to test and repeat and just as a reminder, that's about 50% of their revenue comes from those first party brands and really seeing strong response from customers from, you know, or what they're doing in their, you know, t-shirt printable business is going really strong. You know, I think as we think about that heading into the back half of the year, you know, we are focused on, you know, from that change on test and repeat, you know, it's very much focused on margin expansion in the back half. You know, we do know we're up against strong promotional activity we took last year to right-size Country Kings inventory. So, you know, that will be somewhat of a headwind, but are expecting to get margin expansion. I think as we see the progress they're making on test and repeat, we see it working. For each week you're bringing on new products, you're picking the winners and then repeating into them. I think it takes time to build that cohort of winners and can take quite a bit of time, but it's just a really powerful flywheel when it gets going. And we see the benefit it has across our three brands and are certainly kind of going to continue to lean into it and are happy with the progress Culture Kings are making.
spk00: Great. And in terms of Princess Polly, you know, you added the new stores to the mix. You know, what should we be, for people who know the Accenture City stores, what is going to change in these other stores? You know, that was a great test. It did really, continues to do really well. You know, what's going to be the evolution of, of the Princess Polly store as we see these new other ones come on?
spk06: Yeah, I think, you know, we're really excited for, you know, to continue to expand Princess Polly's footprint to stores. You know, the L.A. store has done really well and, you know, is one of the drivers of and kind of one of the drivers and also just helps build awareness for Princess Polly from an online perspective as well. It's a key part of the driver of that 90% growth in the US that we saw last quarter. I think Polly, that's their first store. They've learned a lot just from a merchandising perspective. The size of the store, the new stores will be bigger than the LA store. Certainly change from a visual merchandising perspective. expecting to put in more SKUs, and really see how do they take that really compelling online experience that they have, leveraging that test-repeat model, not just having newness online each week, but also newness in the store each week. They see that customers are coming back each week to see it, to experience it in real life. So there are some of the changes. Look, I think it's it's great that the new plans they have. I think there's just huge opportunity for Princess Polly to continue executing and continue to build out their store footprint and really just introduce themselves to more and more new customers and get that halo in their online business as well.
spk00: Great, good luck in the back now. Thank you. Thanks, Eric.
spk01: The next question comes from Yusef Scully with Truett Securities. Please proceed.
spk05: Thank you. I'm Kieran. It's nice to see you guys do well, so congrats. A couple of questions. Maybe as you look at your performance this quarter versus Q1 and certainly throughout most of last year, what would you say were the two or three big unlocks of this quarter that drilled that in performance, maybe online versus offline, maybe across brands, certainly GeoSec and DOS as being clearly the outperformer? And then as I look at your Q3 guide, it basically implies a premature slowdown to something like 1% or 2% of the midpoint versus, again, 9% or 10% in Q2. So what happened in Q2 that you don't necessarily see happening in Q3?
spk06: Sure. Thanks, Yusuf. Yeah, look, I think we're really happy with that Q1 performance and certainly building on the actions we've been taking over the last number of quarters. And just, I think, certainly that US growth of 19%, a standout. Doing that with gross margins up 80% and inventory flat, just a great view of, I think, what this model can do. I think as we think about the drivers, Yusuf, I would say direct consumer business was, from a channel perspective, the largest driver across the brands. and the various Omni across the different brands coming up after that. From a brand perspective, I think Princess Polly is certainly very, very strong during the quarter, and we saw tremendous growth at Petal & Pup on the Omnichannel initiatives that they really leaned into. I think as we think about the back half of the year, really just the change in trend is we've come out of a period where we've been quite promotional in Australia to move through that Culture Kings inventory. I think you see the comps somewhat improving there, sequentially anyway, in Q2. I think as we think of the back half, we feel like we're predominantly past that and are more focused now on seeing that gross margin expansion and really looking for that in the back half of the year. Certainly continuing to lean into the omnichannel opportunities, but do know it's more gross margin focused and that we do have probably a harder lap in the back half of last year when we were also very, very promotional, particularly in Australia.
spk05: And then on the debt management, can you talk about any upcoming debt maturities and how you're planning on servicing them?
spk06: Yeah, sure. You know, our debt matures in September 2026. You know, I think a really nice part of this last year when we paid down $50 million of debt, about 35%. There was some build in the first half of this year as we leaned into some inventory at the stronger performing brands and saw some build there. We do expect to continue to pay down or pay down more debt in the back half of this year and certainly we'll continue to do that going forward. We certainly don't want to be or look to be a highly leveraged business. And I think, look, with the progress we've made now, with EBITDA growing much faster than sales growth, up 44% year over year, we certainly feel that the model is there where we can continue to pay down debt and bring down leverage.
spk05: That's great. Thank you very much.
spk01: The next question comes from Ashley Owens with KeyBank. Please proceed.
spk03: Hi, good afternoon. So just first, I want to talk about Australia and some of the choppiness there. Can you just talk about what's embedded in the forecast a bit? And then based on the pressure, I guess, when are you kind of expecting that geography to return to growth and has that shifted at all? And then also just curious in terms of quarter date trends, you know, what you're seeing by region and by category as well.
spk06: Sure. Thanks, Ashley. Yeah, look, I think You know, certainly making progress in Australia, it was really nice to see the sequential improvement there. I think, you know, underneath that as well, we kind of see on just the day-to-day business, the progress Culture Kings are making moving on to that test and repeat model and how the newer product that they're bringing in is really resonating with customers, right? And so for us, I think as we go into the back half of the year, we feel that should drive margin expansion and are certainly going to look to execute against that. And, you know, I think from a growth perspective overall, look, we're really happy that the US is now 65% of the business, you know, growing 19%, you know, in Q2. So I think really great progress there, which we will continue to lean into. We do expect the comps in the back half to get worse from an Australian perspective, but really just because we've got a tougher lap and are more focused on margin expansion and feel good about the guidance and that that is all contemplated in the guidance we've given for the back half of the year.
spk03: Okay, great. And then I guess just to hit on the Princess Polly stores again, as we look out to next year, how aggressive do you plan or want to be in your rollout strategy for the brand? I guess just in general too, how many stores do you think you could see it growing to over time? And then with that, anything if and when we should be expecting to see some more marketing to support these new stores?
spk06: Sure. Yeah, I think, look, we feel that there's just tremendous opportunity for Princess Polly and for all the brands in the US, clearly underpaid by us being up 19% in the US and such strong active customer growth of up 12%. Really looking forward to having these five new stores open this year. I think that's somewhat the pacing we would look to going forward. We certainly want to be very selective in the store locations. We really need to lean into the customer data that we already have and also talk to our customers just to make sure we're picking great locations that we feel we can be very successful with these stores for Princess Polly. you know, pretty much what I think from a pacing perspective. And certainly, I think, you know, huge opportunity, you know, from a direct-to-consumer perspective, but also just across all, I suppose, the omni-channel opportunities.
spk03: Okay, great. Thanks so much.
spk01: The next question comes from Andrea Bonello with Robadi. Please proceed.
spk02: Hi there, thanks for taking my question. I was wondering, looking ahead to upcoming elections and potential concerns around tariffs on goods from China, how will you manage rises in tariffs, given that the majority of your third-party suppliers and manufacturers are based in China? Will we see this in changes in prices or shifting manufacturing to other countries? Thank you.
spk06: Yes, thanks, Andrea. I think we're very focused on the strategy we have and really leaning into the opportunity we have to grow these brands in the US. I think we have clear indication of just the opportunity we have across all of these brands and these Omnia opportunities. As it comes to our supply chain, we're certainly very focused on this. We have some actions in test at the moment looking to diversify our supply chain. They're progressing as we go through the quarter, and I think we can share more next quarter on the results of those and any changes we're making to our supply chain.
spk01: Thank you. Thank you. At this time, I would like to turn the call back over to Mr. Long for closing comments.
spk06: Yeah, thank you all. Really appreciate your engagement with AKA Brands. We feel we're making great progress on executing against our strategies and really demonstrating the progress and we've made it at each of our brands and also the enormous opportunity we have to scale these brands in a profitable way. Thank you for your time.
spk01: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. You may now disconnect.
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