Xcel Brands Inc. (XELB) reported a Q1 2026 net loss of $2.5 million, or -$0.42 per share, marking an improvement from a $2.8 million loss in Q1 2025. Despite a 15.4% decline in revenue to $1.1 million, the company’s strategic pivot towards influencer-led brands and cost management initiatives have positively influenced market sentiment, resulting in a 9.74% increase in aftermarket stock price to $1.95.
Xcel Brands faced a challenging Q1 2026 with a 15.4% decline in revenue, attributed to a transition to a new apparel supplier. The company made significant strides in reducing its net loss and improving non-GAAP earnings. The strategic focus on influencer-led brands has expanded the company’s reach and engagement, positioning it for future growth. With a market cap of just $13.05 million, the stock has surged 166% over the past six months, though InvestingPro data shows the company maintains a "WEAK" overall financial health score.
Xcel Brands is optimistic about revenue growth, citing the completion of a supplier transition for key brands and the sequential launch of new influencer-led brands throughout 2026 and 2027. The company anticipates significant growth in its brand portfolio and aims to reduce operating costs to $7.5 million annually.
Management emphasized the necessity of omnichannel distribution, stating, "You have to be everywhere where people are shopping." The strategic shift towards influencer-led brands is expected to drive significant growth, with management projecting a social media reach of 100 million followers.
Analysts inquired about the impact of the influencer-led brand strategy on long-term growth. Management highlighted the substantial increase in social media presence and the anticipated revenue growth from new brand launches as key drivers for future performance.
Seth, Call Moderator/IR Contact, Xcel Brands: Good afternoon, everyone, and thank you for joining us. Welcome to the Xcel Brands 1st quarter of 2026 earnings call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert W. D’Loren, and Chief Financial Officer, James F. Haran. By now, everyone should have had access to the earnings release for the quarter ended March 31, 2026. In addition, we filed our quarterly report on Form 10-Q with the Securities and Exchange Commission last Thursday. The release and quarterly report will be available on the company’s website at www.xcelbrands.com. This call is being webcast, and a replay will be available on the company’s investor relations website. Before we begin, please keep in mind that this call will contain forward-looking statements.
All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. These risk factors are explained in detail in the company’s most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time. Please note that on today’s call, management will refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP diluted EPS, and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the company’s results of operation.
Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus they provide supplemental information to assist investors in evaluating the company’s financial results. These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP. You may refer to the attachment to the company’s earnings release or the Form 10-Q for a reconciliation of non-GAAP measures. Now I’m pleased to introduce Robert W. D’Loren, Chief Executive Officer. Bob, please go ahead.
Robert W. D’Loren, Chairman and Chief Executive Officer, Xcel Brands: Thank you, Seth. Good afternoon, everyone, and thank you for joining us today. I would like to start today’s call with a brief update on recent developments since the recent filing of our annual Form 10-K and our outlook moving forward. After that, our CFO, James F. Haran, will discuss our financial results for the quarter in more detail. We continue to work hard with all our licensee production partners, powerful influencers, and strategic retail partners to drive our business. We launched two of our influencer or creator-led brands toward the end of the first quarter, and we expect to launch two more in the fall and another in spring 2027. As we previously mentioned, we announced our influencer-led brands with Cesar Millan, Gemma Stafford, Jenny Martinez, Coco Rocha, and Shannon Doherty.
These influencer-led brands grew the social media following in our brand portfolio from 5 million to over 46 million. Based upon our pipeline of new influencer-led brands, we are on track to reach 100 million followers across our brand portfolio. We began wholesale shipments with our licensees for two of our influencer-led brands during the first quarter and on-air programming commenced for them on QVC and HSN in the second quarter. As I mentioned, the other influencer-led brands will be shipping and launching throughout the rest of 2026 on interactive TV and at bricks and e-commerce retailers. We are very pleased and optimistic given early results and demand for these brands. I should add that our TV and streaming content reaches well over 100 million households and generates tens of millions of media impressions per month.
Many of our investors and licensing partners have asked why we are so excited by the influencer-led brand opportunity. Please allow me to illuminate this a little. According to a recent report issued by Goldman Sachs, the influencer or creator economy generated $254 billion of sales in 2025 and is expected to grow to over $2 trillion by 2035. Why is this happening? Marketing dollars are shifting to influencers and influencer-led brands given the relatively high return on ad spend, according to statistics from Shopify Influencer Marketing Hub. Industry surveys note that 67% of consumers trust influencer recommendations over legacy brand ads. We believe we have fully entered this fast-growing market and will continue to penetrate it over the coming years.
We continue to explore opportunities to sell certain of our legacy brands and closed the sale of our Judith Ripka brand at approximately 6x gross royalty income in Q2. This is consistent with the sale multiple of our formerly owned brand, Isaac Mizrahi, and is further confirmation of the value of our brand. I should note that recent analyst reports report that ascending influencer-led brands are trading at revenue multiples as high as 15x revenue. We generated an adjusted EBITDA loss of approximately $700,000 in Q1, flat from the prior year quarter, which we expected. During the quarter, we had approximately $100,000 in non-recurring expenses and lower HSN sales in Q1 caused by a change in the apparel supplier for our C. Wonder and Tower Hill by Christie Brinkley brand.
While this change disrupted inventory availability in Q1, we have significantly improved product quality, which should drive sales going forward. C. Wonder and Christie Brinkley remain two of the most popular brands on HSN, and the new licensee that supplied product on HSN began shipping during this quarter. With the supplier transition behind us, we expect significant growth in these brands compared to the past two quarters. The Longaberger brand is scheduled to launch in spring of 2027 with new products co-created by Shannon Doherty. Shannon has 3 million followers and is perfect for Longaberger. We are pleased with the progress of our brand portfolio, and we believe revenue growth is now in front of us. With that, I’d like to turn the call over to our CFO, Jim Herron, to cover our financial results for the quarter. Jim?
James F. Haran, Chief Financial Officer, Xcel Brands: Thanks, Robert. Good afternoon, everyone. I will now briefly discuss our financial results for the quarter ending March 31, 2026. Revenue for the first quarter of 2026 was $1.1 million, compared with $1.3 million for the first quarter of 2025. The decrease from prior year was primarily attributable to HSN’s transition to a new apparel supplier for our C. Wonder and Christie Brinkley brands in the fourth quarter of 2025, which caused a temporary gap in wholesale shipments and negatively impacted sales for these brands and our associated licensing revenues during the current quarter. Direct operating cost and expenses were $2.1 million for the current quarter, down from $2.3 million in the prior year quarter.
This decrease from prior year was primarily attributable to cost reduction actions taken by management during 2025, which reduced payroll and benefit costs. Looking at our other operating costs and expenses, which were all non-cash in nature, during the current quarter, we recognized a small impairment charge of $61,000 to write down the value of the Judith Ripka trademarks, which we then subsequently sold in April for $2.3 million in cash plus future earn-out consideration. Our depreciation and amortization expense for the current quarter was essentially flat from the first quarter of last year at approximately $0.9 million. The prior year quarter notably included