Well, that was fun. That was my reaction to a quick spin around the Naked Brand Group (NASDAQ:NAKD) website. But a deeper dive made me realize that this is not a company that’s in it for the long haul, and by the look of the NAKD stock, it may not be in business for much longer.
Delisting certainly seems like a possibility. And bankruptcy seems like a pretty good bet as well.
InvestorPlace’s Todd Shriber gave a good summary of the dreary state of Naked Brand’s business (and a good headline) in his recent article. And Josh Enomoto expounded on the macro trends that are creating problems for Naked Brands. He also took some more witty commentary.
So I’ll have to come up with other words to tell you to avoid NAKD stock at all costs.
The Company Should Be Profitable, But It’s Not
If there’s one thing that seems clear, we are a culture that really is obsessed about our undergarments. I see commercials all the time from brands like Tommy John making me question my underwear in ways I have never considered. Stitch Fix (NASDAQ:SFIX) constantly sends me reminders to ask if I want to add underwear and socks to my next order. Really? This is a thing.
But putting my late middle-age confusion aside, it confirms that Naked Brand Group isn’t covering a market that is lacking for a solution. There is no shortage of brands to fill that need.
And that’s my first problem with NAKD stock. Even after divesting its signature brand, Naked Brand, the company still has a lot of brands that, at least visually, appear to have no discernible difference. Yet they are said to cater to “a broad cross-section of consumers and market segments.”
But aside from perhaps cannibalizing from themselves, it took me a minute before I figured out how you could order online. You can, it’s just not intuitive.
The company built its reputation was as a brick-and-mortar store, and they do mention that they are taking steps to step up their e-commerce game. But this may be a question of too little, too late.
The Financials Tell a Bad Story
Net sales for the company’s fiscal 2020 year were down over 20% on a year-over-year basis. And while the company’s gross profit margin increased to 37.5% from 33.5%, that’s where the good news ended. The company had a net loss of $33.9 million net loss, which was higher than the 32 million net loss from the prior year.
Simply put, the company is relying on getting higher margins from less revenue and it’s clearly not working.
However the company did proudly state that its strategic turnaround was complete and that it was now pursuing a lean, direct-to-consumer model. Once again, it seems like the company has recognized the problem much in the way the captain of the R.M.S. Titanic got sight of that iceberg.
That story didn’t end well either.
Avoid NAKD Stock At All Costs
The problem I have with Naked Brands is simply this there’s nothing special about it. I’m not questioning the quality of the product. It may be exceptional. But it’s trying to compete as a high-end alternative in a niche where middle-of-the-road will do just fine.
And that means it has to work harder to build its brand, and it doesn’t seem like a company that has the energy or the time to do that.
If you’re a day trader there might be some money to be made on NAKD stock. Maybe. But if you’re a less experienced investor thinking that you’re capturing a deal, let me rid you of that notion. This is a company on the brink of bad things.
Even if they miraculously find their mojo, you’ll have plenty of time to catch up with this stock. It’s going nowhere fast. Except maybe to bankruptcy court.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.