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On Wednesday, Telsey Advisory Group adjusted its price target for AKA Brands Holding Corp (NYSE: NYSE:AKA), increasing it to $10.00 from the previous $9.00, while keeping a Market Perform rating on the company’s stock. The adjustment came after AKA Brands reported first-quarter earnings that surpassed expectations, particularly highlighting a rebound in growth in Australia and New Zealand, as well as ongoing progress in the United States. According to InvestingPro data, the company has shown impressive momentum with a 14.78% return over the last week, though it remains unprofitable with a loss per share of $2.39 over the last twelve months.
The company’s gross margin experienced a notable expansion, reaching 57.2% as reported by InvestingPro, exceeding forecasts due to stronger full-price sales and better inventory management. However, operating expenses remained unchanged year-over-year, which was contrary to expectations of achieving operating leverage in the quarter. Telsey noted that AKA Brands has shown several quarters of improved results, with revenue growing 8.09% year-over-year, indicating a stabilization of the business despite a challenging macroeconomic landscape and uncertainties related to tariffs.
AKA Brands has reaffirmed its top-line guidance, which Telsey considers a cautious move following the first-quarter performance. The company, currently valued at $93.03 million in market cap, has also adjusted its adjusted EBITDA guidance for the year, reflecting the anticipated greater impact from tariffs, particularly over the last six weeks. Management expects the tariff situation to have a temporary effect on the business, especially as AKA reduces its dependence on sourcing from China throughout the remainder of the year. With a healthy current ratio of 1.52, the company maintains sufficient liquidity to navigate these challenges.
Although the annual guidance brackets the previous consensus, the projected EBITDA for the second quarter fell slightly short. AKA Brands is now concentrating on growth strategies, such as enhancing brand recognition, attracting new customers, and expanding its omni-channel presence through store openings and wholesale partnerships.
Telsey acknowledges the potential for AKA Brands’ brands to grow through product innovation and an expanding active customer base. However, the firm cites limited visibility into the company’s long-term profitability and the highly competitive nature of the retail industry as reasons for maintaining the Market Perform rating. The new price target of $10.00 is based on a 0.32x multiple applied to Telsey’s two-year forward sales forecast of $641 million for AKA Brands, which is between the three-year trough multiple of 0.29x and the recent multiple of 0.41x.
In other recent news, AKA Brands Holding Corp reported a strong financial performance for the first quarter of 2025, showcasing a 10.1% year-over-year increase in net sales, amounting to $129 million. The U.S. segment led the growth with a 14.2% increase, while the Australia and New Zealand regions also contributed positively. Adjusted EBITDA saw a significant rise to $2.7 million, compared to $900,000 in the first quarter of 2024. The company is expanding its product offerings and retail partnerships, with plans to open more Princess Polly stores in the U.S. Analysts from Telsey Advisory Group and Lake Street Capital Markets discussed the company’s strategic moves to mitigate tariff impacts by diversifying its supply chain. AKA Brands projects full-year net sales between $600 million and $610 million, with adjusted EBITDA expected to range from $24 million to $27.5 million. The company continues to focus on expanding its customer base and enhancing its retail presence, particularly through partnerships with Nordstrom (NYSE:JWN) and new wholesale agreements with Dillard’s (NYSE:DDS) and Stitch Fix (NASDAQ:SFIX).
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