A.K.A. Brands Holding (NYSE: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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