The red-hot IPO market has attracted another fashion player.
A.k.a. Brands, which owns the e-commerce fashion brands Princess Polly, Culture Kings, Petal & Pup and Rebdolls, filed to go public on Aug. 24 in yet another signal that digital natives are catching the eye of Wall Street.
Upon filing an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC), A.k.a. plans to raise $100 million through the offering. The DTC fashion platform intends to apply to list its common stock on the New York Stock Exchange under the symbol “AKA.”
The number of shares of common stock to be offered and the price range for the proposed offering have not yet been determined.
Founded in 2018 by investment firm Summit Partners, A.k.a. bills itself as “built for the next generation of consumers.” With a network of 271 third-party suppliers across 14 countries, primarily in China, the company says it moves new designs into production and then into inventory in as few as 30 to 45 days, as compared to up to nine months for traditional apparel brands.
All four of A.k.a.’s brands were brought in via acquisition, most recently premium streetwear seller Culture Kings in March. Acquiring brands is core to A.k.a’s strategy, with the business seeking out high-growth, digitally focused global labels so that it can reach a broad audience across accessible price points and varied styles without cannibalizing its current portfolio.
“We seek direct-to-consumer brands with strong customer followings and a proven track record of operating profitably but need help scaling to further accelerate their growth,” the company said in its S-1 filing. “We seek asset-light brands that have the potential to benefit from the A.k.a. platform, expertise and resources. We look for brands with similar operating and financial characteristics as our existing brands. We are evaluating multiple opportunities for such acquisitions in the near term.”
So far, the four brands under the A.k.a umbrella have followed this diversification route. The fashion-forward Princess Polly brand targets Gen Z women between 16 and 25 and is the top sales driver across the portfolio, bringing in 48 percent of total 2020 sales for A.k.a. with $185 million. Culture Kings is the only A.k.a. brand that has a store presence and caters to men, and brought in $169 million in 2020, which would have represented 44 percent of the holding company’s sales.
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Petal & Pup is focused on the younger millennial demographic between 25 and 34 and sells more trend-driven merchandise such as dresses and accessories, taking in $27 million in sales, or 7 percent of total sales. The Rebdolls brand offers apparel with a full range of sizes from 0 to 32 and emphasizes size inclusivity. Rebdolls generated $4 million in 2020 sales, or just 1 percent of the total.
The public offering comes months after Digital Brands Group (DBG), an up-and-coming fashion brand stable with a similar business model to A.k.a., filed for an IPO of its own. CEO Hil Davis noted during a conference that the decision to go public was highly influenced by the fact that many of its prospective acquisitions weren’t interested in being purchased by a private company.
“We went public to have a currency to acquire these companies,” Davis said. “They either want public stock or cash. Going public allows us to pursue this acquisition engine.”
Whether this scenario is similar to A.k.a. Brands’ own situation or not, it does illustrate the current prestige of the IPO market. Authentic Brands Group, another house of brands which operates on a much larger scale across digital and physical channels via labels such as Barneys New York, Forever 21, Nautica and Eddie Bauer, set itself up for a valuation of as much as $10 billion in filing for an IPO in July.
Clearly, the money is enticing, and it appears more investors are willing to prop up fashion brands during their fundraising period. ThredUp, Poshmark, Torrid and MyTheresa are among the fashion names that have cashed in on the recent surge, with Fabletics reportedly on its way in that direction.
A.k.a.’s sales growth on its own must give investors more confidence in its potential as a public entity. Including Culture Kings’ second-quarter results, the brand house increased 2021 first half net sales to $218 million, representing 166.5 percent year-over-year growth from $81.8 million in the 2020 period. Net income increased 79.7 percent to $4 million dollars, so it is still eking out profitability despite the investments.
After seeing a 69 percent increase in active customers and a 53 percent jump in orders in 2020, A.k.a Brands turned things up in the first six months of 2021. The brands attracted nearly 1.8 million active customers (a 67 percent increase from the year-ago period), increased orders 66 percent to 3 million and increased average order value from $82 to $89.
In the S-1, A.k.a. credits its agile “test-and-repeat” merchandising model for enabling the company to react to demand without taking large initial inventory positions, yet still capture in-season trends. This methodology helped the company introduce 500 to 800 new styles each week across its brands in 2020. Return rates were only 11 percent in 2020.
BofA Securities, Credit Suisse and Jefferies will act as joint lead bookrunning managers for A.k.a.’s proposed offering. Wells Fargo Securities, KeyBanc Capital Markets, Piper Sandler, Cowen and Truist Securities will also act as bookrunning managers.