Is a.k.a. Brands Holding (NYSE:AKA) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that a.k.a. Brands Holding Corp. (NYSE:AKA) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is a.k.a. Brands Holding's Net Debt?

The chart below, which you can click on for greater detail, shows that a.k.a. Brands Holding had US$111.3m in debt in September 2025; about the same as the year before. On the flip side, it has US$23.4m in cash leading to net debt of about US$87.9m.

How Healthy Is a.k.a. Brands Holding's Balance Sheet?

We can see from the most recent balance sheet that a.k.a. Brands Holding had liabilities of US$107.6m falling due within a year, and liabilities of US$193.6m due beyond that. On the other hand, it had cash of US$23.4m and US$8.21m worth of receivables due within a year. So it has liabilities totalling US$269.6m more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the US$119.6m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, a.k.a. Brands Holding would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if a.k.a. Brands Holding can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for a.k.a. Brands Holding

In the last year a.k.a. Brands Holding wasn't profitable at an EBIT level, but managed to grow its revenue by 5.4%, to US$595m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months a.k.a. Brands Holding produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at US$6.7m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of US$26m. And until that time we think this is a risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for a.k.a. Brands Holding you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.