Why Specialty Retail Company A.K.A. Brands Shares Are Diving Today

A.K.A. Brands Holding AKA shares are trading lower today. Truist Securities analyst Youssef Squali downgraded the stock to Hold from Buy at a lowered price target to $10 from $12.

The analyst re-rated the stock following the company’s softer-than-expected fourth-quarter FY23 results and below consensus FY24 guidance, reflecting a tough macro environment in Australia and operational challenges.

Yesterday, the company reported adjusted EPS loss of $(0.310), which beat the consensus of $(0.470), but sales of $148.912 million missed the consensus of $154.142 million.

The company expects first-quarter FY24 revenue of $108 million-$112 million (vs. an estimate of $124.42 million) and FY24 revenue of $540 million-$555 million vs. street view of $583.93 million.

Nevertheless, Squali cited that the growth in the U.S. has improved to the DDs%, led by improvements across all key brands. The analyst added that the improving inventory turnover and lower capex/opex drive positive FCF for the company, aiding it in reducing debt and strengthening its balance sheet.

However, the analyst said the company’s efforts to enhance its offering & expand into wholesale/omnichannel are not likely to happen until FY25.

Squali lowered the revenue estimate for FY24 to $544 million from $568 million. For the first quarter of FY24, the analyst estimates revenue and Adjusted EBITDA of $108 million and $0.395 million, respectively.

The analyst expects revenue of $571 million for FY25 vs. a consensus of $594 million.

Price Action: AKA shares are down 16.18% at $10.00 on the last check Friday.

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