AKA Brands witnessed its Culture Kings business thrive in the US but suffer a decline in Australia during the third quarter of FY23.

The NYSE-listed parent company said that its Culture Kings flagship store in Las Vegas has already surpassed its annual revenue target.

However, the company attributed a decline in its gross margin to the targeted discounting implemented in Culture Kings Australia and a higher returns rate.

AKA Brands’ net sales fell 9.6 per cent to US$140.8 million while net loss significantly widened to $70.4 million in the three months ended September 30. Gross margin slid to 55.4 per cent and adjusted EBITDA plunged 49.1 per cent to $4.7 million.

“Accounting for approximately 60 per cent of total net sales, the US region represents our greatest opportunity for growth and brand expansion,” said Ciaran Long, interim CEO and CFO at AKA Brands.

Long noted that the opening of its first Princess Polly store in Los Angeles has outperformed the company’s expectations.

“Despite the growth in the US, we continue to face macroeconomic pressures in Australia, which led to lower-than-expected adjusted EBITDA,” said Long.

“We are taking clear and decisive actions to improve our operations in the region, including rightsizing inventory to make way for product newness and rapidly transitioning Culture Kings to a data-driven, short lead time merchandising cycle.”

For the full year, AKA Brands forecasts net sales of $550 million to $555 million and adjusted EBITDA of $13.5 million to $15.5 million.

The interim CEO said that the company expects to deliver growth and profitability in FY24.