Slumping Naked Brands Is Nearing the Point of No Return

Way back there in 2017, Naked Brand Group Inc. (NASDAQ:NAKD) traded in territory worthy of a mega-buff body builder. If I have my figures right, NAKD stock topped $1,400 per share on Feb. 10, 2017. It was a heady time for a company that, in its own words, “focused on enhancing the architecture of the body.”

a man and woman wear plain white underclothes from Naked Brand (NAKD)
Source: Shutterstock

Fast forward to 2021, and “architecture of the body” might as well be an Ostrogoth ruin. NAKD stock trades at around $1 per share. That means you’d have to sell in excess of 20 shares to buy a four-pack of the company’s Bendon Move With Me Boyleg Briefs. Huh. Just where are those boylegs moving to if they’re joined at the hip to a company whose new tagline might as well be “the Naked and the dead”?

Sadly, there was hope for NAKD stock as recently as late January, when its share price shot up more than 300% in three days. For that you can credit the same redditors and the members of r/Wallstreetbets who picked GameStop Corp. (NYSE:GME) as one of their underdog stocks to back. In fact, the two rocket rides paralleled each other on the calendar.

But now? It’s a case of whether the intimate apparel company is cliff diving into a lingerie swan song.

NAKD Stock and the Danger of Delisting

Poor NAKD stock. We could at this point pause to ask what the analysts think. That is, if we could find a single analyst who cares, because apparently none do. It’s the same sort of sad feeling when I visit the order page for those Move With Me Boyleg Briefs and see that not a single customer has left a comment.

Even the rebels of Reddit apparently got bored with Naked Brands sometime around Feb. 1. Since then, NAKD stock has dropped some 40%. Nor does the skid show any signs of stopping. Now below that psychologically important dollar-per-share level, this investment simply reeks of inevitable failure.

Last July, the company had to beg the Nasdaq for more time to avoid delisting. Shares traded for 63 cents. Extrapolating the current rate of decline since Feb. 1, NAKD stock will hit that same rude landing before the end of April. You have no idea how much I hate writing this. It’s difficult at best to find any evidence of impropriety, corruption or mass incompetence to rival Bear Stearns here.

Out of Fashion, from Wall Street to the Runway

To the contrary, NAKD stock may be a victim of its sector. Fashion is notoriously fickle. Tastes change. Brands get blackballed or relegated to thrift shop clearance for no rational reason. But if Beyonce, Justin Timberlake or even a mitten-clad Bernie Sanders sport your stuff, it’s a license to print money. Turns out Wall Street and the fashion runway aren’t so different after all.

Far be it from me to advise Naked Brand Group. But if they tapped my content marketing experience, I’d suggest they seek the endorsement of history’s most famous underdogs. This would get attention, raise awareness, generate some amusing press and maybe give the company a new lease on life. Come on. Can’t you just picture a Frederick’s of Hollywood Alexia Love Mesh Teddy grafted onto a lithograph of Vincent “I never sold one of my paintings” Van Gogh?

Or: maybe get someone as universally detested as the My Pillow guy to model one of their teeny-weeny men’s bathing suits. As PR moves go, everybody wins. Look. What else will help NAKD stock at this point if even the likes of Roaring Kitty have walked away? Unless …

Next to Nothing Left, Or Left to Lose

With nothing to lose, you might as well go for it. That kind of thinking launched Dollar Shave Club, where a video by a frustrated improv comic named Michael Dubin scored more than 15 million views. It cost $5,000 to shoot. It helped him raise $190 million in venture capital. Dubin sold the company for $1 billion to Unilever (NYSE:UL) and stepped down in January.

Naked Brands should be so lucky: $1 billion is more than double what the company is currently worth. And with its back to wall, it will have to make its own luck. Where NAKD stock is concerned, the turnaround needs to begin now. Without it, delisting once again becomes a distinct possibility. Where the company goes from there is deeper into penny-stock territory until it literally finds itself stripped naked.

For me to recommend that you avoid NAKD stock seems beyond stating the obvious. Suffice to say that this stands as a cautionary tale about the hazards of buy and hold; certain stocks never recover from a losing streak. You need to know when to cut your losses. But that shouldn’t be your concern if you avoid investing even one thin dime on this slumping penny stock.

Focus instead on enhancing the architecture of your portfolio’s body.

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

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