Naked Brands (NASDAQ:NAKD) has a catchy name, obviously, but what’s really exposed here is NAKD stock. The one with a 95.26% year-to-date decline and a closing handle of just seven cents as of Nov. 10.
Seven cents doesn’t buy much these days, but it does in fact buy one share of a moribund Australian intimate apparel maker. It’d be easy to blame Naked’s woes on the novel coronavirus pandemic, but as one of my colleagues astutely points out, the stock was scuffling prior to the pandemic, sliding 74% in the two months before the U.S. shutdown.
Naked has an array of non-pandemic related problems, including slow adoption of e-commerce, exposing it to competition from the likes of Amazon (NASDAQ:AMZN) and Etsy (NASDAQ:ETSY), among others. Second, the intimate apparel market isn’t particularly large – forecasts indicate it’ll be worth $194 billion by 2023, which isn’t substantial in retail terms.
Assuming it can survive that long, Naked isn’t showing much of an ability to capture a needle-moving percentage of $194 billion, but price action by the stock confirms the company is vulnerable to independent designers/sellers on the aforementioned online retail platforms.
NAKD Stock Has Pandemic Woes
As noted above, the pandemic isn’t the cause of Naked’s woes. The lingerie maker was struggling prior to that, but Covid-19 is having effects on this company, none of which are good.
The math here is really simple. Until a vaccine comes to market, hopefully sooner than later, the most effective way to guard against transmitting or catching the coronavirus is to wear a mask. Obviously, masks hinder something Naked banks on: People being intimate with each other. Sorry, but nothing screams “Don’t kiss me” quite like masks and personal protective equipment (PPE).
Fortunately for the mask devotees out there, scores of studies confirm that masks are effective at reducing Covid-19 transmission. That makes sense knowing what we now know about how the virus passes from person to person. However, all of this is unfortunate for a company like Naked.
Then there’s the impact the pandemic is having on being social and dating. Like so many other pursuits, owing to the pandemic, dating is going digital in a big way. Perhaps you’ve seen some of the recent Match (NASDAQ:MTCH) commercials. Guess what that the major online dating site is pitching to prospective subscribers? Dates over FaceTime, Zoom or some other internet, not-in-person avenue.
In other words, Match is adapting to the times. Anecdotally, I can say with some authority as a single man that’s looking for love (I really am) that I encounter a fair amount of women on various dating apps that simply don’t want to meet in person because of the pandemic. Then there are some that will, but ask that I wear a mask in whatever setting we choose to meet.
I’ve got to respect that and I do. Wear a mask and we can past the pandemic. But all that mask-wearing and digital dating creates a dearth of in-person dating. Limited live dates crimp anyone’s chance of intimacy, thereby reducing a desire to purchase Naked Brands wares.
Bottom Line: Seeing Red, But Not Red Lingerie
It’s somewhat miraculous that NAKD stock still resides on the Nasdaq with a share price of seven cents. A reverse split of 1-to-100 would only vault the stock to $7. And, it’s time on the exchange is running out because it needed to be back in price compliance by Nov. 10.
The situation here is really simple: Until folks start cozying up to each again, there’s no good reason to cozy up to intimate apparel makers, including Naked Brands.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.