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Tuesday, October 20, 2020

Naked Brand Group Inc (NASDAQ:NAKD) Explodes Higher on Merger Potential

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Naked Brand Group Inc (NASDAQ:NAKD) is a lifestyle brand company that’s clearly begun to spur some interest among players in the marketplace as shares blast off recent lows. The primary catalyst for Friday’s wild ride is a press release out of the company announcing that they have entered into a Letter of Intent for a proposed merger with Bendon Limited, “a global leader in intimate apparel and swimwear renowned for best in category technology and design throughout its 70-year history”. The stock has run as much as 250% higher on the announcement, but faded back to just 60-70% in gains on a follow-up (of course) announcement of a coming direct offering as management looks to take advantage of the share pop to raise cash.

The release notes that the businesses are expected to benefit from the merger along a number of synergistic dynamics: Bendon would gain immediate access to the U.S. capital markets enabling it to further grow the business globally, both organically and through future strategic acquisitions; the Naked brand would be able to leverage Bendon’s well-established global wholesale and retail distribution channels; the combined entity would capitalize on the industry-leading expertise of Carole Hochman, Naked’s Chief Executive Officer, to strengthen its global intimate apparel and sleepwear brand portfolio; and operating synergies through integrated supply chain management and administrative functions.

Naked Brand Group Inc (NASDAQ:NAKD) promulgates itself as an apparel and lifestyle brand company that is currently focused on innerwear products for women and men. The company manufactures and sells men’s and women’s underwear, intimate apparel, loungewear and sleepwear through retail partners and direct to consumer through an online retail store, wwwwearnaked.com.

According to company materials, “We have a growing retail footprint for our men’s innerwear products in premium department and specialty stores and internet retailers in North America, including accounts such as Nordstrom, Dillard’s, Bloomingdales, Hudson Bay Company, Amazon.com, barenecessities.com and others. Naked was founded on one basic desire – to create a new standard for how products worn close to the skin fit, feel, and function. Naked’s women’s and men’s collections are available at www.wearnaked.com, and Naked has a growing retail footprint for its innovative and luxurious innerwear products in some of the leading online and department stores in North America. In 2014, renowned designer and sleepwear pioneer Carole Hochman joined Naked as Chief Executive Officer, Chief Creative Officer, and Chairwoman with the goal of growing Naked into a global lifestyle brand. In June 2015, Naked announced a strategic partnership with NBA Miami HEAT (now Chicago Bulls) star Dwyane Wade. The 3-time NBA Champion, 11-time All Star, and Olympic Gold Medalist joined the Company’s Advisory Board, and is the Creative Director for a signature collection of men’s innerwear launching 2016. Naked is now headquartered in New York City and plans to expand in the future into other apparel and product categories that can exemplify the mission of the brand, such as activewear, swimwear, sportswear and more.”

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Ms. Hochman stated, “We are extremely excited about the potential of this proposed merger, and look forward to capitalizing on Bendon’s scale and expertise to further expand the Naked brands. The Bendon team has built a phenomenal business, and by leveraging their infrastructure, product and geographic knowledge, and talent, we believe that we can accelerate our growth in the innerwear fashion and lifestyle market.”

Justin Davis-Rice, Executive Chairman of Bendon, commented, “This is a transformative merger that will create a powerful creative, marketing, operational and capital markets platform. As a publicly traded company in the U.S., we expect to have an opportunity to accelerate our growth and strengthen our position as a global leader in intimate apparel, swimwear, innerwear fashion and lifestyle brands through both organic growth and strategic acquisitions. We are also delighted to partner with industry pioneer, Carole Hochman, who brings unrivaled experience to our company and whose expertise is expected to not only strengthen our existing brands but to provide us with an unprecedented opportunity to develop our sleepwear business, a product category that represents a significant growth opportunity.”

The chart shows more than 190% tacked on to share pricing for the listing in the past month, but that move comes in the context of a larger bearish trend. The situation may be worth watching. NAKD has evidenced sudden upward volatility on many prior occasions. What’s more, the listing has witnessed a pop in interest, as transaction volume levels have recently pushed nearly 1300% beyond its prior sustained average level.

Now commanding a market cap of $10.3M, NAKD has a bankroll ($736K) of cash on the books, which stands against about $238K in total current liabilities. NAKD is pulling in trailing 12-month revenues of $1.5M. However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -18.8%. You can bet we will update this one again as new information comes into view. For continuing coverage on shares of $NAKD stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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