This Version of Radio Silence Is Painful for Naked Brand

I got the call today to write about Naked Brand Group (NASDAQ:NAKD), the online lingerie company that licenses the Frederick’s of Hollywood brand. Its idea of investor engagement is to issue one news release about NAKD stock in almost three months.

NAKD stock Lingerie on a pink background.
Source: NazarBazar/Shutterstock.com

The last time I wrote about Naked Brand was on June 18. At the time, I suggested that it would be hard-pressed to trade over $1 for 10 consecutive days of trading – the requirement to remain in compliance with Nasdaq – by the stock exchange’s Oct. 25 deadline for meeting its listing requirements. 

I didn’t see it providing investors with a catalyst to move NAKD stock higher – and keep it higher. That was 50-plus days ago. And now it has 50-plus trading days to meet the 10-day requirement. That’s a big stretch. 

So, what does it do to reassure investors that it’s on the case? It issued a news release on July 9 announcing its annual general meeting on Aug. 20 in Sydney. 

I really don’t understand all this cloak-and-dagger stuff. And, even more so, I don’t understand how any investor in his right mind would continue to own its stock. 

I could care less if this dog with fleas goes to $10 at some point in the future. Smart investors know better than to waste their time trying to read between the lines. Naked Brand’s version of radio silence is painful.

Here’s why. 

NAKD Stock Delisting

InvestorPlace’s Louis Navellier recently discussed how the company’s moves to become a pure-play e-commerce retailer have yet to pay dividends for investors. Therefore, trading around 54 cents, the risk-to-reward proposition is exceptional.

Look. I get that 54 cents isn’t a lot of money. Multiplied by 1,000 shares, it’s still not a big expense at $540. For those earning a good living, it’s the cost of taking your wife out to dinner two or three times.

However, Navellier doesn’t say that you will worry yourself to death watching the ticker minute-by-minute until the big payday comes in. It rarely does. 

This is a stock that’s faced multiple delisting threats in recent years. Its stock’s been diluted some many times, the people who issued the online license for Frederick’s of Hollywood (FOH) – Authentic Brands – issued the initial license in July 2017. It was renewed for five years starting Jan. 1, 2021 – received 3.8 million shares at $2.20 a share for their troubles along with the forgiveness of $9.9 million in debt held by Naked Brand. 

Those shares would be worth a little more than $22,000 today. So at least Authentic got the debt written off. Besides, it’s got a lot more important stuff going on right now. It filed to go public in July. With a net income of more than $225 million in 2020, I doubt CEO Jamie Salter is too concerned about one small part of its empire. 

My colleague called FOH an “iconic name.” I would say that’s debatable. To me, an iconic lingerie brand would be La Perla or something French. But I digress. 

If It’s Got Such a Great Story

In my June article about Naked Brand, I believe I overstated the FOH revenue in fiscal 2020 (Jan. 31, 2021, year-end). I said it was 32.5 million New Zealand dollars ($23.2 million). However, that was for all of Naked Brand’s e-commerce sales. As page 35 of its 20-F shows, FOH’s fiscal 2020 sales were 24.4 million New Zealand dollars ($17.1 million).

Look to page 44 of its 20-F, and you’ll notice that its U.S. sales equal its FOH sales. However, if that holds from the two previous fiscal years, FOH’s sales fell by 29% between fiscal 2018 and 2020. 

But, hey, go ahead and bet your kid’s college fund on the company spending its $270-million largesse wisely because that’s the only shot you’ve got to really cash in on the 54-cent stock. 

I understand that it’s not going to reveal any of the mergers and acquisition work it’s done to find an acquisition for these funds, but at the very least, it could tell investors what’s happening at FOH online. 

Not a murmur. 

It really is painful to watch. But, like a fender bender, there’s nothing there to see. Move along.

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On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/version-of-radio-silence-is-painful-nakd-stock/.

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