Naked Brand Group Isn’t a Buy, But a Barometer

Chances are, you’re probably not going to find too many bullish takes on Naked Brand Group (NASDAQ:NAKD) stock.

Despite the Temporary Pop, Naked Brand Stock Needs a Miracle to Stay Afloat
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On the surface, Naked Brand offers relevant products. As you probably know, the company specializes in undergarments and lingerie, with perhaps its most popular brand being Frederick’s of Hollywood. Yet despite the attractiveness of its product portfolio, NAKD stock has been left wanting.

When I first started discussing Naked Brand Group, I didn’t get the warm and fuzzies. Earlier this year, I felt that millennials moving away from branded products toward practical (and perhaps lower cost) apparel would hurt NAKD stock. Later, with the crisis stemming from the novel coronavirus, the idea of people spending money on undergarments didn’t really click.

To be honest, I’m not sure if that reasoning was the catalyst for Naked shares tumbling further into ignominy. For my own ego, I’d like to think so. But then another thought popped into my head: Shouldn’t NAKD stock be moving higher?

For one thing, the concept that consumers are saving money amid the pandemic didn’t quite pan out as I thought it would. Frankly, I didn’t appreciate that we’re living now in a bifurcated economy. Those who are part of the 40 million at risk of eviction certainly are in desperation mode. But those who have money are spending it: just look at the meteoric rise of Nike (NYSE:NKE) and Lululemon Athletica (NASDAQ:LULU) as evidence.

But the real reason that NAKD stock should join these two apparel makers involves the raw fundamentals of pent-up demand. With wide scale stay-at-home orders and social distancing protocols, the dating game has been a minefield.

Let’s just say that singles are probably antsy.

The New Normal Is the Worst for NAKD Stock

Typically, I check the Transportation Security Administration’s passenger screening numbers to gauge strength for the airliner industry. However, it’s also a great barometer for consumer confidence amid a pandemic. Within this crisis context, the numbers look good. On Aug. 30, for instance, 807,695 people traveled across U.S. airports, representing nearly 43% of the year-ago level’s passenger volume.

That’s the highest year-over-year comparison since Covid-19 derailed the airliners. At the same time, the bad news is that we’re still talking about passenger capacity less than half of pre-pandemic levels. Plus, the percentages shift wildly depending on the day.

People are still scared of the coronavirus. Therefore, they are refusing to travel unless they must, which hurts the air travel industry. But by the same logic, people are scared of dating, which likewise pressures NAKD stock.

According to a CNBC report in late May, singles are turning to dating apps in record numbers. In addition, “The rules of online dating are also rapidly changing to adapt to this new climate.” Zoom Video Communications (NASDAQ:ZM) and video dates have become state-endorsed methods of romance – and the “in” thing to do.

However, CNBC featured comments from Serena Kerrigan, a 26-year-old New York single and creative director, which I found interesting. “There’s no dealing with the logistics. Who’s going to split the bill? Are you going to kiss me after the date? There’s so many different things that are very distracting.”

Essentially, it’s the no expectations for hanky-panky that startled me in the context of NAKD stock. Let me be blunt: women buy lingerie for multiple reasons. It’s that reason that you’re thinking about that motivates sales. But the coronavirus has really taken that incentive off the board.

Naked Brand Risks Complete Irrelevance

In 2018, the lingerie market value in the U.S. hit $6.87 billion. Projections at that time suggested that the market will continue to grow, hitting $11.36 billion by 2025. Now, the coronavirus may change these assumptions for the worse, which would heap more pressure on NAKD stock.

Because during the pre-pandemic years, Naked Brand was bleeding sales growth while the market itself was rising higher. Today, we’re in an environment where the cool kids are dating via FaceTime. Before the coronavirus, this would have been unthinkable, at least for the young and mobile crowd.

In 2020, it’s the only way to date. Moreover, these new changes may become at least semi-permanently etched into our psyche. Singles are genuinely running risk-reward analyses on whether a kiss is worth it. I’m sorry but if we’re heading toward such a germaphobe society, NAKD stock won’t have much opportunities for success.

Even in the best of times, Naked failed to appeal to consumers. With everyone scared to kiss, let alone take their clothes off, it’s clear that NAKD is a barometer – a startlingly negative one.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and health care. 

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