From a cursory perspective, underwear and intimate apparel specialist Naked Brand Group (NASDAQ:NAKD) should perform reasonably well in the markets. For one thing, the underlying product is a necessity – at least, one would hope so! Secondly, the NAKD stock price should benefit from secular demand. After all, I’ve never heard of anyone skimping on underwear simply based on economic or market conditions.
That said, it’s the platform, not the specific brand that represents indelible demand. One look at the technical charts for the NAKD stock price confirms this point. Shares suffered one of the most devastating declines of 2019, hemorrhaging an almost unbelievable 98%.
As terrible as this value erosion is, it doesn’t tell the whole story. In the early summer of 2018, NAKD stock reached four-digit prices on an intraday basis. Eventually, it would settle down into the low hundreds by the fall of 2018. Unfortunately, shares continued to drop.
At time of writing, you can pick up NAKD at less than two bucks a pop. But if you think this is an unprecedented discount on a misunderstood stock, you better think again.
NAKD Stock Is No Longer Relevant
At some point in time, the brands under Naked Brand Group may have attracted consumer attention. Along with its namesake brand, the company commands Frederick’s of Hollywood, Heidi Klum Intimates, and Davenport.
Unfortunately for the organization, times change and along with it, fashion trends. Today, millennials are no longer brand focused when it comes to their apparel. Unlike prior generations, young consumers don’t wish to be walking billboards. Because of this shift in social behaviors, that puts the NAKD stock price under serious pressure.
Naked Brand isn’t just about selling underwear and intimates – it’s about branded underwear and intimates. However, the biggest demographic workforce in the U.S. don’t care as much about brands. That’s a huge strike against the company’s investment profile.
And what do millennial consumers want in their apparel, intimate or otherwise? Sustainability and durability rank among the most desired qualities. In part, this means purchasing high quality apparel that’s appropriate for all seasons. This too could negatively impact Naked’s seasonal brands.
Another point is that millennials and the emerging generation may not care for making fashion statements through underwear. According to author and men’s stylist Russell Smith, women tend not to notice a gentleman’s undergarments. Based of his surveys, Smith wrote:
Women, it seems, like undergarments plain, clean and new. That’s all that matters, if you’re trying to impress them. Any other form of undergarment self-expression – that is, underwear that you feel are sexy or clever – is bound to do the opposite, to make your prospective partner question your taste and possibly (even, yes, in this enlightened age) your manliness.
If there’s no upshot for young men buying branded underwear, that eliminates half of Naked Brand’s consumer base.
Broader Fashion Market Offers No Respite
Although Smith’s assessment may be anecdotal – I have no idea how he conducted his surveys – it makes sense. If you want to make a statement, you’ll do so with external, conspicuous purchases: a fancy car, a nice watch, or even designer jeans.
But underwear? Let’s face it: roughly half of the global population (if not more) should keep their outer clothes on.
Additionally, millennials eschewing popular brands have done a number on publicly traded fashion and apparel companies. From Gap (NYSE:GPS) to American Eagle Outfitters (NYSE:AEO), all have struggled to adapt to modern consumer trends. In today’s fashion world, utility trumps brands. Obviously, that bodes poorly for NAKD stock.
And this brand avoidance isn’t just limited to apparel either. AdAge demonstrates that even in over-the-counter medication, millennials prefer off-brand labels over branded ones, presumably for cost reasons. Stated differently, today’s consumer is far more economically rational than prior generations.
This might just put the final nail in the coffin for NAKD stock. Undergarments have never been high on consumer visibility. But the fact that younger consumers don’t care about brands at all is a harbinger for a company named Naked Brands.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
