Naked Brand Q3 Sales Double, Losses Halve

At Naked Brand Group, the intimates and underwear company headed by Carole Hochman, sales in the third quarter more than doubled to $317,748, while its net loss dropped to $3.533 million from $7.228 million in the same quarter last year (on just $145,790 in sales).

While the company’s situation is improving, it admitted in its latest financial release that it “expects to incur significant further losses in the development of its business,” and “will be required to obtain the necessary financing to pursue its plan of operation. Management plans to obtain the necessary financing through the issuance of equity and/or debt.”

For the nine months ending October 31, 2015, Naked reported a loss of $8.483 million on sales of $938,157 compared to a loss of $23.040 million on sales of $430,590 during the same period in 2014.

While sales have risen during the year, Naked’s inventory level rose much faster. As of January 31 of this year it reported total inventory valued at $183,226, while as of October 31 that level had risen to $1,341,387.

During the year the company has taken a variety of steps to increase its customer base including expanding its product range, expanding its online sales to consumers, signing an expensive licensing deal with a basketball player and hiring public relations and marketing firms. At the same time, the company reported that the concentration of its business with one (un-named) customer rose dramatically. “For the three and nine months ended October 31, 2015, the company had concentrations of sales with a customer equal to 40% and 43%, respectively of the company’s net sales (2014: 29% and 34%, respectively).” In its filing Naked noted the dangers of such a concentration. “The company has concentrations in the volumes of business transacted with particular customers. The loss of these customers could have a material adverse effect on the company’s business.”

Naked added, “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, Nordstrom, Hudson Bay Company, Holt & Renfrew, Amazon.com, barenecessities.com and many others.”

In an interesting note, the company revealed that in the latest quarter, while sales in the U.S. rose from $78,840 to $267,448, sales in Canada, where it was founded, actually dropped from $66,950 in 2014 to $50,300 this year. The reason for the drop was not explained in the filing.