Naked Brand Group (NASDAQ:NAKD) saw its value drop a little further on Tuesday. That story is nothing new for the maker of underwear and intimate apparel.
With the latest hit, NAKD stock is down 98.6% over the past 12 months. What makes Tuesday’s 5.66% slide (to $1.15) notable is that it occurred after the company announced it is selling its namesake “Naked” brand.
The proceeds of the sale are intended to help fund the company’s ongoing strategic turnaround, but as the price of NAKD shows, investors aren’t buying it.
Naked Brand Groups Announces It is Selling Naked Brand
On Jan.21, Naked Brand Group announced it is selling its Naked brand. That makes for just about the most confusing headline ever. Here’s a little background to help make sense of it.
The company Naked Brand Group owns or licenses a number of different underwear and lingerie brands, including Heidi Klum Intimates, Frederick’s of Hollywood, Bendon, and Naked. Last June, Naked Brand Groups announced that it was exploring the option of “strategically divesting” one or more of its brands. In a press release, the company stated:
As a management team, we will consider offers made for select brands within our portfolio where we feel there is the opportunity to fortify our balance sheet, drive strategic growth initiatives and create value for our shareholders over the long-term.
In other words, with NAKD stock then at $14.40 and the situation looking grim, the company was looking to sell off one or more of its brands, hoping to use the cash to improve its financial outlook and to fund its turnaround. The move did work in the sense that it attracted some interest from investors and resulted in a short-lived pop in the stock price. By July 8, NAKD hit $26.40, but just as quickly resumed its downward spiral.
On Jan. 14, Naked Brand Groups announced it had hired several new executives, including a new CFO. One week later, on Jan. 21, the company announced the outcome of that strategic divestiture initiative: “We are pleased to announce the divestiture of Naked brand trademarks as part of our strategic turnaround.”
In other words, Naked Brand Groups sold its namesake “Naked” brand. According to its SEC filing, the payoff for NAKD in selling all rights to the Naked brand was $600,000 in cash.
Going All-In on Bendon
As part of the announcement it was selling the Naked brand, NAKD assured investors that it was going all in on its Bendon brand. The company plans to “… build Bendon as our master brand globally, leveraging its storied 72-year history.”
The problem here is more fundamental than which specific brand in its portfolio to push. As InvestorPlace contributor Josh Enomoto has pointed out, younger consumers are losing interest in clothing brands. In particular, they seem to care nothing about whose label is on their underwear. Given how storied brands like Gap (NYSE:GPS) are struggling in this market, it seems unlikely that Naked Brand Groups is going to succeed.
Bottom Line on NAKD Stock
NAKD stock has dropped 98.6% in value over the past 12 months, and over 26% already in 2020. With the latest slide — to $1.15 — it has closed at yet another all-time low.
Despite frantic maneuvering by the company, including appointment of new executives and now the divestiture of its namesake Naked brand, the company’s turnaround seems no closer and remains a penny stock. It may be tempting to pick up shares for a company whose stock has dropped that dramatically.
For just $1.15, you can own stock that others were paying over $81 for just 12 months ago. And that $81 pales in comparison to the lofty price Naked Brand Group stock fetched five years ago.
Unfortunately, the chances of NAKD stock suddenly increasing in value again as a result of its strategic turnaround efforts seem to be pretty close to nil.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
