If there’s one good thing I can say about intimate apparel and swimwear retailer Naked Brand Group (NASDAQ:NAKD), it’s that the company has managed to keep NAKD stock listed on the prestigious Nasdaq exchange in 2020.
That’s an impressive accomplishment, actually. Perhaps through divine intervention or some other miracle, Naked Brand Group has managed to maintain (or at least regain) compliance with Nasdaq’s Listing Rule 5550(b), which requires minimum stockholders’ equity of $2.5 million.
So, Naked Brand Group averted the delisting threat, at least for the time being. That being said, the company’s CEO, Anna Johnson, might have expressed overconfidence when relief would have been the more appropriate overreaction.
“With this matter now resolved and a fortified balance sheet, we remain focused on driving growth to create value for our shareholders,” boldly declared the Naked Brand CEO. But is this just an instance of the emperor wearing no clothes?
A Closer Look at NAKD Stock
Concerning the long-term price action of NAKD stock, InvestorPlace contributor Ian Bezek concisely summarized the ongoing train wreck.
“As recently as 2017, NAKD stock was still worth $1,000 per share on a split-adjusted basis. Since then, shares are down more than 99%,” Bezek observed.
Why would anyone choose to buy NAKD stock, then? I would venture a guess that speculators sometimes anticipate a quick price spike. One example would be the day in August when NAKD shares gained 48%.
In case you’re wondering, nothing particularly encouraging happened on that day. Basically, Naked Brand company adjusted how its promissory notes would be converted into ordinary shares of NAKD stock.
That won’t mean much to retail traders considering a long position in NAKD shares today. What’s more meaningful is the fact that NAKD stock’s trailing 12-month earnings per share is -$106.87.
For a stock that trades at around seven cents per share, that’s an absolutely miserable statistic. It’s a glaring red flag that casts a long, dark shadow on the CEO’s confident declaration.
The Naked Truth
On Oct. 20, I pulled out all the stops to warn InvestorPlace‘s readers not to buy NAKD stock. The share price hasn’t moved much since then, so you have another chance to abandon ship.
As of Nov. 6, three consecutive days of more than 100,000 novel coronavirus cases in the U.S. were reported. On the third of those days, the number of infections in the U.S. reached at least 129,606.
On top of that, hospitalizations for Covid-19 in the U.S. increased for a 12th consecutive day, at more than 54,500. Meanwhile, the state of Texas was about to exceed 1 million cumulative Covid-19 cases.
The truth of the matter is that people aren’t in the right state of mind to think about intimate apparel. Maybe things wouldn’t be so bad for Naked Brand Group if the pandemic had never happened. But that’s an alternate universe and we have to be realistic as investors.
Desperately Seeking Value
The Naked Brand CEO sounded awfully confident about the company’s fiscal health. So, I conducted a search for any evidence that Naked Brand Group is in a great financial position.
Honestly, I couldn’t find any evidence to support the CEO’s optimism. On the company’s press-releases page, the most recent meaningful disclosure of Naked Brand’s financial results goes all the way back to May 8.
Next, I did some web sleuthing and stumbled upon some stats related to Naked Brand Group’s balance sheet. Once again, my quest for shareholder value ended in failure.
On the first day of 2020, Naked Brands evidently had $88,530 in total assets and $94,814 in total liabilities net minority interest. It’s a simple subtraction problem from there, yielding -$6,284 in assets minus liabilities.
And, that was before the onset of the novel coronavirus in the U.S. Unfortunately, investors will have to guess how much worse the overall fiscal picture is today for Naked Brand Group.
The Bottom Line
The aforementioned executive-level vote of confidence won’t mask the ongoing damage that the pandemic has wrought, and will continue to wreak, upon Naked Brand Group and its hapless stakeholders.
Despite the CEO’s proud declaration to the contrary, NAKD stock holders will, most likely, be left out in the cold.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
