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  • Nick Monjo

Naked: Big Sales Drop, While Losses Continue

Naked Brand Group Limited reported dramatically shrinking sales and growing losses for the year ended January 31, 2020 (which it calls its fiscal 2020).

Naked revealed, “net sales for the full year of fiscal 2020 totaled NZD$90.1 million, or USD$58.5 million, compared to NZD$111.9 million, or USD$72.7 million, for the full year of fiscal 2019.” Meanwhile, in fiscal 2020, “net loss totaled NZD$52.2million, or USD$33.9 million,” compared to “a net loss of NZD$49.2 million, or USD$32.0 million, in the full year of fiscal 2019.”

In the press release that accompanied the results, CEO Anna Johnson asserted the year was “highlighted by the continuing success of our new strategic direction, finalizing the completion of our transition to a lean, direct-to-consumer business model - having exited unprofitable wholesale channels worldwide and further leaning into our e-commerce and physical store infrastructure.”

But the company’s actual filing with the SEC revealed that its E commerce activities have actually been shrinking gradually over the past three years, while at the same time losing increasing amounts of money.

The SEC filing noted, “E-commerce revenue for the periods ended 31 January 2020, 31 January 2019 and 31 January 2018” which “include revenue from a US brand called Fredericks of Hollywood” actually slid from a high of NZD$32.2 million (about $19.6 million at todays exchange rates) in its fiscal 2018, down to NZD$31.9 (about $19.4 million) in its fiscal 2020. More significantly, Naked revealed that “for the 12-months ended January 31, 2020, e-commerce EBITDA was a loss of $2.6m (about $1.6 million) compared with a loss of $0.4m for the 12-months ended January 31, 2019. The loss for this period was impacted by increase in operating costs in this sector.”

In a related move at the end of April, Naked announced the renewal of its Frederick’s of Hollywood licensing agreement with brand owner Authentic Brand Group (see separate article). The Naked statement revealed a dramatic projected decline in sales for the FOH label: “Net Sales: USD$16.5M - USD$17.5M” for the year ended January 31, 2020. Back in November 2018 Naked had stated, “the Frederick’s of Hollywood e-commerce business generated net sales of approximately $20.0 million for the trailing twelve months ended June 30, 2018,” and added, “management expects the Frederick’s of Hollywood e-commerce business to generate $25.0 million in revenue for the fiscal year ended January 31, 2019.”

As it shifts away from portions of its wholesale business, Naked is planning to continue to sell through about 60 company-owned Bendon retail and outlet stores in Australia and New Zealand. Those were closed recently due to the COVID-19 crisis.

Naked pointed to a variety of moves over the past year that it said have improved its financial condition including the sale of the Naked brand name and the termination of the company’s Heidi Klum license; “a global strategic review” of cost-saving measures; and the exit of “unprofitable channels in the E.U., U.K. and select Australian and New Zealand independent channels, inclusive of all related distribution and support infrastructure.”

Said Johnson in her press release, “The savings from the closure of satellite offices and the concentration of staff in our Bendon offices in New Zealand have been immense. Our current corporate and administrative infrastructure is more than sufficient to allow us to operate a strong e-commerce business globally while maintaining our robust footprint of physical stores.” She added. “We continue to fortify our balance sheet through innovative financial transactions on all fronts, reducing trade payables by NZD$13.1 million” and “entered into a new, amended two-year USD$10.85 million credit facility with the Bank of New Zealand which provides us with a friendly source of working capital, allowing us to ensure we can fully stock our channel with increasingly high-margin merchandise.” — NM

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