With its stock trading at just 10 cents, you’d question why Naked Brand Group (NASDAQ:NAKD) is still listed on the stock exchange. The company barely meets the minimum requirement of $2.5 million of stockholder equity. Even before the novel coronavirus obliterated the retail business, the company was struggling to generate profits. Hence, a potential second wave of Covid 19 could be curtains for NAKD stock.
The stock is currently trading at almost its lowest price ever at 9 cents. Additionally, its 6-month price index is at meager 22 cents. The annualized volatility of NAKD stock is at a massive 78%. However, to blame the pandemic for its decline would be inaccurate, as the stock’s been on the downslope since November last year. 2019 was an incredibly tough year for the company, with a 31.8% decline in net profits. Moreover, the pandemic has essentially brushed aside any chances of recovery this year.
Lackluster Financial Performance
Naked Group reported its torrid 2020 financial results back in May. Sales were down 19.5% to $58.5 million in the year, and 4.7% higher than in 2019. Last year, Revenues were impacted by stock supply issues, Brexit, and the termination of several wholesale partnerships in the US. With the pandemic crippling supply chains worldwide, many of the issues last year are likely to have compounded. Additionally, net losses widened from $33.9 million to $32 million. Losses increased modestly compared to last year due to reductions in expenses.
The cost reductions are due to the company’s global strategic review efforts. Through its plan, it effectively reduced administrative, corporate and finance costs totaling $10.5 million. It exited many of the unprofitable channels in the UK, US, and select channels in Australia and New Zealand. Furthermore, it has done well to fortify its balance sheet through debt restructuring transactions. These transactions include a new two-year $10.85 million credit facility agreement with the Bank of New Zealand. It also raised $18.5 million through convertible promissory notes.
“Our fiscal 2020 was highlighted by the continuing success of our new strategic direction, finalizing the completion of our transition to a lean, direct-to-consumer business model” stated Anna Johnson, CEO of Naked. The management didn’t provide an outlook for next year, nor did they comment on the pandemic’s impact on the business. Expect troubling times ahead for the company, especially in such volatile conditions.
De-listing Fears are Gone for Now
NASDAQ sent Naked Group a notice in May, notifying the company that its stockholders’ equity fell below the $2.5 million benchmark. As a result, the company did not meet the minimum equity requirements for listing on the exchange. The company was given 45 days to submit its plan but was later granted an extension until November 10, 2020. This month, NASDAQ determined that Naked had done enough to meet the minimum requirement. CEO Johnson stated that “With this matter now resolved and a fortified balance sheet, we remain focused on driving growth to create value for our shareholders.”
With the de-listing troubles out of the way, the management can focus on its real troubles, sales. Sales for the company have been on a downward spiral for the past four years. What is most surprising is the company’s inability to expand its revenue base in a growing industry. According to Statista Research, the intimate apparel market is will be valued at $194 billion by 2023. Hence, sales are a cause for significant concern for the company if it hopes to survive in the future.
Final Word on NAKD Stock
Naked Group is an exceptionally difficult spot at this time. NAKD stock is worth pennies, the pandemic has shut down its stores, and it barely meets the minimum listing requirements. Even before the pandemic, the company was struggling to grow its revenues and turn a profit. Therefore, NAKD stock is a definite no-no for the foreseeable future.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.