A.K.A. Brands Holding (NYSE:AKA) Q2 2026 Earnings Call

0:00 Greetings, and welcome to the AKA Brands Holding Corp. Second Quarter Fiscal twenty twenty six Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As

0:18 a reminder, this conference is being recorded. It is now my pleasure to introduce Casey White, General Counsel. Please go ahead. Good afternoon. Thank you for joining AKA Brands to discuss our second quarter twenty twenty six. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward looking statements within the meaning of the Private Securities Litigation Reform Act 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including when we refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Any forward looking statement providing during this call, including projections for future performance is based on management's expectations as of today.

1:06 We undertake no obligation to update forward looking statements except as required by applicable law. These statements are neither promises nor guarantees and are subject to known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statement. 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 also contain non GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. 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.

1:53 With that, I'll turn it over to Kieran. Good afternoon, and thank you for joining us to discuss our second quarter twenty twenty six results. In the second quarter, we generated net sales of 160,100,000 essentially flat to the prior year, while driving adjusted EBITDA growth of 16% year over year to $8,700,000 further validating that the structural improvements we've made across the business are enabling strong profit flow through. We delivered on our growth expectations in both The U. S. And rest of world geographies with net sales of 251%, respectively. The Australia and New Zealand region were the outlier with net sales contracted approximately 13%, pressured by a challenging macro backdrop and a tough prior year comparison from the clearance of non go forward goods.

2:47 Importantly, Q3 to date momentum has accelerated in all regions with overall net sales growth in the high single digits alongside healthy margins giving us continued confidence in our outlook for the second half of the year. We're seeing clear proof points of success across both our women's and men's businesses, reinforcing that our strategic initiatives are resonating with customers and positioning us well for long term growth. As I highlighted on our Q1 call, AKA Brands is a fundamentally repositioned operating model anchored on profitability and durability. Our second quarter results are a clear reflection of that transformation with strong profit flow through driving adjusted EBITDA growth in the mid teens.

3:33 Our performance this quarter was driven by the expanded distribution of our brands across stores, wholesale and marketplace, the strengthening of our operational foundation and continued financial discipline across the business. We're off to a solid start in Q3 and I remain confident that 2026 will serve as another meaningful proof point that our strategy is working and our business is on a stronger trajectory. Reiterating our strategy, we've continued building out our omnichannel model beyond our direct to consumer routes. Princess Polly now operates 13 U. S. Stores plus our first two Australian locations with more openings planned in both markets this year. As we announced this morning, Culture Kings is also expanding its store footprint in The U.

4:22 S. With a signed lease for a new store in Puerto Rico and final negotiations for a major metropolitan opening later this year. At the same time, we are expanding our wholesale and marketplace partnerships, which are exceeding expectations, expanding brand awareness, attracting new customers and creating incremental growth opportunities. And behind the scenes, we've laid the operational groundwork for this expansion. Inventory has been well managed, driving more full price sell through and improved inventory turns are giving us greater flexibility to invest in growth. That discipline has also enabled Culture Kings and Minimal to further evolve towards the test and repeat merchandising model, which has been a multiyear initiative that is now showing up clearly in our margin improvements.

5:13 As I previously mentioned, we also completed a full overhaul of our sourcing network in 2025, diversifying across geographies and vendors. That gives us a more resilient supply chain, one built to support test and repeat and to handle the current trade environment as we keep growing. Together, these initiatives have strengthened our financial model. We ended the quarter with our strongest balance sheet since becoming a public company, reducing our inventory by 14% and our debt by 8% versus the prior year. And we ended the period with net leverage of 3.37 times. This provides us with increased financial flexibility to continue investing in both growth and profitability.

6:00 Looking ahead, three priorities remain driving direct to consumer growth through differentiated products and marketing, expanding reach through retail, wholesale and marketplace and continuing to sharpen our operating model. We're also scaling our AI investments, seeing early gains in imagery, marketing efficiency and inventory with more margin benefit expected over time. Turning now to our brand highlights. Princess Polly, our largest brand delivered another strong quarter. The brand's expanding omni channel presence continued to extend its reach beyond its successful direct to consumer model, driving growth across both new and returning customers with stores, wholesale and marketplace each making meaningful contributions.

6:48 Princess Polly's 1,000 square foot pop up at The Grove in Los Angeles, which opened in May, far exceeded our expectations, and we're excited to have made The Grove a permanent location. Princess Polly is on track to open four additional stores in The U. S. And one in Australia, all by year end. Looking ahead to 2027, we plan to open as many as 10 new Princess Polly stores with five leases already executed in major trade areas, including Charlotte, Boca Raton, Nashville, Burlington and Jacksonville. Longer term, we see the potential for a minimum of 100 Princess Polly stores in The U. S. Alone, up from a current fleet of 13 stores. As I mentioned, our sales growth of more than 50% in the Rest of World was another bright spot in the quarter.

7:40 The largest driver was The UK distribution center that launched in March, which is delivering the customer experience we envisioned. The two day delivery window is transforming conversion with momentum compounding week over week. This confirms for us the tremendous growth opportunity we have for Princess Polly in The UK and internationally, which we will look to capitalize on over the coming years. From a merchandising perspective, Princess Polly enters the back to school selling season with an evolved approach that builds on its test and repeat model. Beginning this month and informed by strong customer feedback, the brand expanded its offering with deeper buys in core seasonal styles across denim, sweats and tops. This is designed to capitalize on peak selling throughout the season, both in stores and online.

8:30 I want to be clear though, test and repeat remains the core of Princess Polly's assortment strategy. What we're doing is layering in evergreen programs season after season in the categories where customer demand has proven durable. Taken together, these results underscore expansion of Princess Polly's addressable market remains a key strategic priority. Our smaller women's brand Pedal and Pop continue to expand its wholesale and marketplace distribution in Q2. Nordstrom remains a productive partner with strong unit velocity and sell through across dresses and casual styles in store and online. Macy's was a notable Q2 call out and Nuuly remains a strong growth partner with tops now the number one performing category on the platform, reinforcing the strength of our expanding separates offering.

9:24 Petal and Pop continues to build distribution of its expanding lifestyle assortment by adding more specialty wholesale partners. And during this quarter, it will take another important step, taking part in the specialty retail tradeshow magic in Las Vegas, the largest wholesale tradeshow in The U. S. Looking ahead for Petal Pup, we've intentionally pulled forward our product flow with fall launching in August and holiday in October, four to six weeks earlier than last year. This gives both our direct to consumer and wholesale partners a longer selling window heading into the back half. Petal and Pop is well positioned for the second half, and I'm confident in the white space runway and long term trajectory of omnichannel playbook that has driven success across our women's brands.

10:13 We're expanding beyond direct to consumer through stores and wholesale, while continuing to execute our disciplined full price test and repeat merchandising strategy. Customers are responding to improved product and a less promotional approach driving strong sell through. While sales were not at the level we expected for Culture Kings in Australia in the quarter, the business contributed meaningfully to the overall gross margin expansion. Culture King's experiential retail model together with its portfolio of in house brands that we have now transitioned to a test and repeat model, including Minimal, Loiter and Carre provide a strong foundation as we expand across new channels.

11:07 Minimal's recent performance have been among the strongest we've seen from the brand with several key products achieving exceptional success in TikTok shop and Minimal now ranking as a top five brand in the men's category on the platform. Leuter will lean further into collaborations with their recent WrestleMania partnership and the upcoming Sonic the Hedgehog collaboration serving as great examples of how differentiated the Leuter brand is. And finally, in Q2, Carre launched their first global collaboration with Coca Cola centered around the World Cup, and we're excited by Carre's product pipeline and future collaborations. The team's continued work expanding the in house brand portfolio, curating third party brands such as New Era, Adidas and ASICS and driving the strategic transition towards a more full price test and repeat model sets the stage for meaningful profitable growth ahead.

12:06 Marketing remains a key strength for Culture Kings. Brand activations, creator partnerships and exclusive collaborations continue to drive traffic, customer engagement and cultural relevance, reinforcing the foundation for profitable growth. Our men's brands are now in a solid footing to follow a similar path to our women's business, expanding reach through brick and mortar retail, wholesale partnerships and marketplaces. We're still early in this journey, but I'm confident that we're in a strong position to meaningfully grow our men's total addressable market. As I've mentioned, we signed a new Culture King store lease in Puerto Rico and we're in the final negotiations for another opening in a major metropolitan market.

12:53 We expect to have both new stores open in Q4 twenty twenty six. These will be Culture King's first new U. S. Store opening since 2022 and mark an important milestone in the brand's next phase of growth. New stores will draw on the learnings from our highest performing Australia locations as well as our highly productive and profitable Las Vegas flagship. In closing, our second quarter results reinforce that the operating model we've built is delivering. We posted double digit adjusted EBITDA growth, positive operating cash flow year to date and our strongest balance sheet position since our IPO. The work we've put into go to market strategy, sourcing, inventory and channel expansion is translating directly into profit flow through.

13:40 Q3 to date trends have been strong, and we continue to make progress building out our omnichannel model, well underway in women's, just beginning in men's. Taken together, that gives me real confidence in both the back half of the year and the long term opportunity across our brand portfolio. I want to thank our teams for their continued hard work and commitment. Our results are a direct reflection on their dedication to our brands and our customers. Before I turn it over to Kevin, I want to take a moment to note a change to our Board. Eileen Eskenazi has stepped down after many years of dedicated service. And on behalf of the entire company, I want to thank her for her contributions and counsel over time.

14:28 I'm delighted to welcome Carrie Cassidy to the Board. Carrie brings deep expertise in talent and organizational leadership, having served as Chief People Officer at Restoration Hardware and held senior leadership roles at Levi Strauss, Barclays and First Data and currently serves on the Board of Philma and G. L. Mazzata.

14:53 As we scale our brands portfolio, her perspective on leadership and organizational performance will be a real asset to this Board. We're excited to have her on board. With that, I'll turn it over to Kevin. Thanks, Kieran. For the second quarter, net sales and adjusted EBITDA were in line with our expectations, with adjusted EBITDA growing 16%, reflecting continued execution against our full year plan. Let me walk you through the drivers. Net sales were $160,100,000 for the second quarter compared to $160,500,000 a year ago. On a constant currency basis, net sales declined 5.3%. By region, net sales in The U. S. Increased percent to $110,700,000 net Net sales in the Rest of the World increased 50.5% to $9,600,000 driven in part by the opening of our new U. K. Distribution center.

15:47 In the Australia and New Zealand region, net sales declined 13% to $39,800,000 where we're seeing consumers under increased pressure from the macro environment. Total orders were $2,040,000 down 0.5 year over year. Trailing twelve month active customers, excluding wholesale, increased 4.4% to $4,310,000 compared to $4,130,000 a year ago.

16:13 And average order value was $78 consistent with last year. Gross margin increased three sixty basis points to 61.1%. Let me provide some additional detail on our Q2 gross margin. The reported 61.1% rate did not include any AEBA refunds. Of the three sixty basis points of year over year expansion, approximately two forty basis points related to lower year over year tariffs. The remaining expansion of 120 basis points was driven largely by our Streetwear brands, a direct result of higher full price selling, partially offset by higher airfreight costs. Our outlook, which I'll cover in a moment, assumes a gross margin of approximately 59% for Q3 and reflects current tariff rates and elevated airfreight costs.

17:06 Moving to selling expenses. Selling expenses were $47,800,000 compared to $45,400,000 a year ago. The increase was driven by higher in store selling expenses as we continue to increase our retail footprint. As a percentage of net sales, selling expenses were 29.9% compared to 28.3% a year ago. Marketing expenses were $21,400,000 compared to $19,900,000 a year ago and 13.3% of net sales. General and administrative expenses were $27,500,000 flat with a year ago. Adjusted EBITDA increased 16% to $8,700,000 in the second quarter, our highest quarterly adjusted EBITDA since Q2 twenty twenty two, driven primarily by higher gross margin.

17:56 This compared to $7,500,000 a year ago. Our adjusted EBITDA margin grew 80 basis points to 5.5%. Turning to the balance sheet. We ended the quarter with $21,100,000 in cash and cash equivalents compared to $23,100,000 a year ago. During the quarter, we received substantially all of the $25,800,000 in expected IEPA tariff refunds, which is reflected in our operating cash flow. Total debt at the end of the quarter declined 8.1 to $99,900,000 from $108,700,000 a year ago as we continue to focus on reducing our leverage and strengthening our balance sheet. Net leverage declined to 3.37 times at the end of the quarter compared to 3.5 times a year ago.

18:44 We ended the quarter in a healthy position with $79,190,000 in inventory, down 13.6 from a year ago. Turning now to our outlook. We're pleased with our strong start to Q3 with net sales up high single digits and are confident in the strategic initiatives in place as we head into the back half of the year.

19:05 We are reiterating our guidance for fiscal twenty twenty six. We continue to expect net sales to be between $625,000,000 to $635,000,000 and adjusted EBITDA of between 30,000,000 to $32,000,000 For the third quarter, we expect net sales to be between 160,000,000 and $164,000,000 As I mentioned, we expect gross margin of approximately 59 and adjusted EBITDA of between 8,000,000 and $8,500,000 in the third quarter. For modeling purposes, we expect to incur a onetime charge of approximately $3,000,000 in Q3 related to a planned distribution center relocation that will be reported in selling expenses but excluded from adjusted EBITDA. For the full year, we anticipate fiscal twenty twenty six stock based compensation of approximately $6.5 to $7,000,000 depreciation and amortization expense of roughly 20,000,000 to $21,000,000 interest and other expense of approximately 16,000,000 to $18,000,000 an effective tax rate of negative 10% CapEx between 18,000,000 to $20,000,000 and weighted average diluted share count of approximately $11,000,000 In closing, we are pleased with our execution this quarter against our strategic plan.

20:20 We believe we are well positioned to build on this momentum and continue delivering long term value for our stockholders. With that, we'll open the call for questions. Thank you. We'll now be conducting a question and answer session. Our first question is from Ryan Myers with Lake Street. Hey guys. Thanks for taking my questions. Congrats on the strong quarter. Just thinking about the unchanged revenue guidance, obviously, you guys are expecting to see some pretty significant momentum here in the second half of the year. And I know you faced some easier compares from last year's second half. But just walk us through maybe what you're seeing in the business right now demand picking up. Is it maybe a continuation of what you saw in the first half of the year just so as we understand kind of the strength in the second half of the year?

21:33 Yes. Thanks, Ryan. I think it is great to see that kind of we're now up high single digits as we kind of go through Q3. And I think, look, it's somewhat the performance, I would say, kind of certainly for U. S. And Rest of World that we started seeing as we saw kind of improving comps there and performance as we went through Q2. And look, with U. S. Is running up double digits quarter to date, I think there's combination of drivers there, right? I would say compared to this time last year, our inventory is just in a much better position and our inventory flows in a much better position. We certainly had a lot of challenges last year as we made such significant transition to our supply chain.

22:24 We also have more wholesale partners, more marketplace, which more distribution points, which continues to build there. And then look from a store perspective, we have seven more stores as we can we'll end Q3 than we had last year. So obviously some nice comp from there. And I think look one of the standouts of last quarter was that the performance that we saw in the Rest of World group and particularly kind of what

22:54 we see happening from opening up that UK distribution center with Rest of World up over 50% in the quarter. So I think, look, there's a lot of strong momentum across the business. And I think great, like I said, to see us back at double digit growth in The U. S. And high single digits overall. Right. For sure. And then thinking longer term, you guys had said Princess Polly targeting at least 100 stores. So what are you seeing from the current store base in terms of productivity and paybacks that kind of gives you the confidence in that target longer term? Yes. I think with 13 doors open so far, so look, it was still early days on kind of the opportunity that we have.

23:43 We'll do another look to do another 10 at least next year and then certainly see kind of 100 potential in The U. S. And I think, look, what we're seeing at the moment is that the stores are introducing us to new customers. They also have a nice halo effect for the online business and we just see really, really strong productivity. We're modeling them all to have a payback of two years or less. And I would say we're seeing kind of better performance than that across the fleet. And I think, look, we're still early days. We're I think how we are evolving our approach to assortment being more evergreen, think, is particularly helpful for the stores. I'm excited to see how they perform now in the back to school season with more of that denim, fleece and tops inside there and just kind of really showing up in a strong way for their customers. So, yes, I think we're just really excited about the opportunity.

24:45 Got it. No, that's great to hear. Thanks for taking my questions. Our next question is from Eric Beder with SCC Research. Good afternoon. Congratulations. Let's talk about Culture Kings. When we see the new stores come into Puerto Rico in the metropolitan area, what's how can you compare and contrast that with what we're seeing, what the stores were in Vegas and how you're looking upon kind of leveraging those? Yes. I think, look, Eric, are super excited that we will have another two stores open for Culture Kings in The U. S. Before the end of the year.

25:34 Like you said, one in Puerto Rico, one in another major metropolitan area. I think the stores that we will open will be more in that kind of 4,500 to 5,500, 6,000 square foot size. So certainly smaller than Vegas. From a size perspective, I think it won't have some of the really big features that Vegas has. But I think we'll take a lot of learnings from the new Brisbane store that we have in in Australia, how well that's performing and what we've learned from Vegas, right? I think it will very much continue to be, I would say, headwear, footwear core components of the store, but also really leading with our own first party brands. And I would say in particular, Minimal, Leucher, St. Martha, American Trift continue to have really strong performance.

26:29 And I would say now kind of across the world as bring in new product, we're starting to see that and how it's a meaningful increase to the overall gross margin of the business, but we can also see on that newer product we're bringing in. In Australia and The U. S, it's growing double digits, even more growth from a gross margin dollar perspective. So I think it's going to be great to have some more doors open and really show off the Culture Kings brand to people. And here, it's Australia. Could you talk about a little bit more about the two things. One is you opened another Princess Polly store. How are the Princess Polly stores doing? And what's the potential for that? And secondly, what are you seeing economically that's kind of causing kind of Australian growth after a very long period of positives there? Thank you.

27:22 Yes. Thanks, Eric. Look, was great. Prince Poly opened their second store in the Gold Coast area after the first one in Bondi Beach last year. And I would say, look, phenomenal success, the amount of traffic they got on that first weekend and I would say kind of performance has continued to be really strong for the brand. The brand is obviously Princess Polly just really well established in Australia. This is the second store, so I would say that kind of that customer has been really waiting and longing to get in their feel and touch and feel the product. So I think, look, just super success there. I think longer term in Australia, we could certainly see a handful, maybe up to 10 stores.

28:11 As a reminder, we've got eight stores for Culture Kings in Australia. I think we'll continue to be predominantly a direct to consumer business down there, but certainly could see a handful of stores down there for Princess Polly. And then as it relates to the region itself, yes, like you mentioned, we had been on a nice period of seeing growth from the region. And look, the region was up 3.8% in Q1 and Culture Kings was pretty much flat comping. We certainly saw pressure there from a macro perspective, significant kind of fuel hikes, rate hikes. I would say what we are seeing and have heard from other retailers is pretty similar, that kind of pressure degrading in June and into July.

29:04 I would say, look, some of the bright spots for us are obviously seeing the stores in the region positive comping in July. It's great to see that. I think it's really showing the progress that we've made on resetting that business, getting the right product in there, moving past the older product and that newer stuff, as I mentioned, we are seeing double digit comps on that product and even more from a gross margin perspective. So I think look, all of that is pointing to us feeling that that business is going to get back on track. We're making really good progress on doing that and gives us a lot of confidence to open new stores now in The U. S. For the brand as well. Great. Thank you.

29:54 Our next question is from Randy Konik with GF. Hey guys. Thanks for taking my questions. I guess what I want to ask about is now with the announcement of Princess Polly thinking at least 100 stores. Just I think it would be super helpful to understand how you think about ground long term penetration by channel, let's say, how you think about ecom versus stores versus wholesale of the broader of the entire kind of portfolio? And then can you give us some like high level thoughts on how you think about margin contribution or overall margin by channel so we kind of think through how we think about overall long term operating margins for the entire company? That'd be super helpful. Thanks.

30:46 Yes. I think it's certainly great the work we've done over the last couple of years. I would say look at the individual brands, but also across the group on really following that strategy of leaning into direct consumer with product from a marketing perspective, but also opening up these new channels. And I think, look, we've learned a lot over the last couple of years from a store perspective, from a wholesale, from a marketplace, even from TikTok, I would say over the last twelve months and the kind of the opportunity across them all, I would say all have slightly different operating model, all have slightly different, I would say, economics from more from a geography of gross margin selling and marketing perspective.

31:35 I think what we can see with them all, Randy, is look, there's just a huge opportunity for us, right? We're really early on. And I think when we kind of put our product in front of customers, they are reacting to it really positively and giving us confidence to lean into these opportunities. I certainly think for if today we had 100 stores for Princess Polly, I think with the halo benefit that we could get to the online business as well as how many more customers we'd introduce to the brand, you will still see that direct to consumer business being larger than stores. And then I would say that for us then wholesale marketplace would be materially smaller than both of those opportunities as well, but still meaningful to the overall business. So I think probably for me that mix longer term, I think majority still direct to consumer with StoresNext and then wholesale marketplace.

32:40 And I think a version of that holds through certainly across the streetwear business and probably for petal and pop as well, although the timing of it might be a little bit different on that brand. Got it. And then my last question would be, when I look at the cash flow statement in the press release, it looks like debt pay down exceeded CapEx on a six month basis. So maybe give us some perspective of how you're thinking again, let's say medium term about capital deployment to grow, let's say, Polly units or stores and then versus your thoughts on debt pay down, like how do you think about that kind of interplay between CapEx utilization for stores and debt pay down? Super helpful. Thanks.

33:33 Yes. Thanks, Randy. Yes. No, we finished the quarter obviously in a really great spot on the balance sheet as we talked about. We did have the iEPICASH come in during the quarter, which was obviously great. The debt is down year over year 8% and our leverage is down both sequentially from Q1 and also year over year down to 3.3%. It will continue to be a priority for us to bring down debt, to generate cash and we definitely see the potential to do that. If you kind of reflect back and look at the last eighteen months, which smooths out some of the ins and outs of all the tariff noise, we've generated $35,000,000 of operating cash and that we've put $25,000,000 to CapEx and 10,000,000 to debt. So you can see that we have that track record of being able to fund the growth and then also to continue to bring down debt and to bring down the leverage, that will certainly be a priority for us to chase the growth and also to do it in a healthy way from a balance sheet perspective.

34:36 Yes. And I would just add on, Randy. I think certainly from a it's great to see the progress on EBITDA, 16% growth year to date. It's up I think over 35% for the six month period versus last year. But look, we're still haven't seen the full benefit of the progress we're making in the streetwear right? It's great to see the margin up 120 basis points. And I think as we've talked about for a while now, customers would start foreseeing the new product and really reacting positively to it. It's great to see that. We'd see it in the financials in gross margin first, which we have now for the last couple of quarters. I think next, we'll start seeing it in increasing EBITDA and then we'll really start seeing it from a comp perspective.

35:24 And I think when that really kicks in at the level we kind of expect that it can, I think we'll continue to increase EBITDA, increase cash flow and increase our ability to lean into these growth opportunities that we have? Thanks guys. Our next question is from Dana Telsey with Telsey Advisory Group. Hi, everyone. Nice to see the progress. On Princess Polly, the 100 store opportunity, I could definitely see that. As you think about the go forward and the expansion there, how many can you open a year? Are you seeing as you open more? Are there whether it's cost to open, whether it's fixtures?

36:12 Is there leverage that you can get? And as you think about the store size and where you're going, is there different store sizes in different types of neighborhoods? And then at Culture Kings, any learnings from culture from Princess Polly about opening stores in The U. S. And what you should or shouldn't do? And then just on the retail stores part versus wholesale, how do you think of the margin structure of retail and wholesale? Thank you. Yes. Thanks, Lena. I think gosh, we've look, I think we've learned a lot. I would say, it's I think we're super fortunate, right, with just the level of data that we have and how we can analyze where customers are, customer frequency, customer white space that we have and how that lines up with different mall locations and opportunities that are there. For us, it's we can really kind of focus in on what are the right spots for us to open a store.

37:17 And look, it's somewhat then around timing from a is there the size that we want and with the economics that we want. I think we're very much at this stage looking for those kind of right spots, right locations, right economics for us and rather than chasing a kind of particular store count. I do think, look, I'd love to do kind of would expect to do 10 stores next year for Princess Polly. That's a 50% increase year over year or kind of to the overall fleet. And I think, look, as we continue to kind of refine how we're opening stores, we can accelerate that process as well. As it relates to the cost to open stores, I think, look, we're certainly have been refining over these first 13 that we've opened, how the store should be laid out, what fixtures really make sense for us and for our customers with how they shop.

38:13 So I think very early days on figuring out how we bring the costs of store openings. And I would say that from a fixture perspective and just also kind of from a speed of opening. And I think, look, we are taking those learnings across to Culture Kings as well, right? We are not needing to rebuild systems, tools, processes as we open more stores for Culture Kings. So I think they'll benefit from some of the work that Princess Polly has done and will allow them to be more efficient and quicker with opening stores. And then just from a margin perspective, look, I would say certainly from a gross margin perspective, obviously kind of stores materially higher from getting full price at retail and then just all of the margin there versus the wholesale.

39:13 And then but obviously you have higher selling expenses and some marketing expenses for stores rather than wholesale. So I think look, you kind of blend out to, I suppose, EBITDA before G and A pretty similar across both channels. But obviously you're getting that full retail from a store perspective. Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session and does conclude today's conference as well. You may disconnect your lines at this time. Thank you again for your participation and have a wonderful day.