When you think about New Zealand, intimate apparel likely isn’t the first thing to come to mind, but Naked Brand Group (NASDAQ:NAKD) is causing quite a stir. Let’s take a closer look at NAKD stock.
The original company was the current Bendon brand that launched in 1947 with a pretty wild idea at the time — build women’s intimate apparel and swimwear that didn’t constrict their bodies but actually worked with them for comfort and style.
Today, that idea has spread across Naked Brand’s nine brands — Bendon, Bendon Man, Naked, Pleasure State, Lovable, Hickory, Davenport, Fayreform and Fredrick’s of Hollywood. And those brands are now available across the world, for all shapes and sizes and at all price points.
NAKD currently has the original 60 brick-and-mortar stores that Bendon has operated in Australia, but it is also sold in the U.S. and Canada, Northern Europe, the U.K., and Russia. Furthermore, the company has recently opened an office in Hong Kong.
Becoming Naked Brand Group
The Naked Group was organized in 2017, when ownership saw the opportunity to create a presence in a historically fragmented market sector with the goal of making each of its brands best in class.
Many other big brands in the sector are just divisions of larger companies that don’t have a single focus on this specific sector. It’s like buying Amazon (NASDAQ:AMZN) for its entertainment division rather than buying Netflix (NASDAQ:NFLX).
Rather than having a broad selection of styles, Naked Brand focuses on high-end, provocative garments or utilitarian designs for the broader marketplace.
And there’s certainly evidence that demand for more comfortable underwear is growing, as you can see in the growing number of ads for startup underwear and lingerie companies that have jumped into the e-commerce space.
A Coronavirus Winner
One thing that has truly helped move this space forward is the pandemic. Whether it’s to treat yourself to something nice that no one can see on a video call or to spice things up with a partner that you’ve been living on top of for the past year, intimate apparel or even just some interesting new underwear can be a good, relatively low-cost way to start.
And NAKD has begun to transition from its brick-and-mortar roots to a global e-commerce company with an array of price points and styles.
In 2018, the stock was trading at over $675 a share. But that was a different company, with fewer shares available and a smaller footprint.
Today, NAKD stock is trading for less than $1 a share. And that’s after a 358% increase year-to-date.
Obviously, some of this interest is from Reddit’s r/WallStreetBets speculators looking to run another stock up that’s cheap enough for people to get into. But the fact is, NAKD is up about 60% in the past 12 months, so some of this run is improving business.
There’s little doubt that a company that did $58.5 million in sales in 2020 is not the next Netflix. But it’s trading well off its 52-week highs even now, and its numbers are starting to improve.
On Feb. 1, NAKD offered almost 30 million new shares at $1.70. The company is diluting its stock to expand its operating capital, which isn’t that surprising for a small company trying to leverage its popularity.
Plenty of Growth Opportunities to Come for NAKD Stock
Another reason NAKD stock may well have a future is the fact that its major regional trading partner — China — has yet to be tapped, nor has most of Southeast Asia for that matter.
While Australia and China are having a bit of a trade war, New Zealand isn’t. And Chinese investors love cheap, high-risk, high-reward stocks as much as Americans, especially now that casinos are quiet.
But remember, this stock is risky. It has some potential as well. And it could end up an acquisition by a larger garment industry player, especially at current prices.
Its products are sexy, but the industry isn’t. But getting NAKD may be worth your while here.
On the date of publication, GS Early has no position in the stocks featured in this article. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article.