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  • Nick Monjo

Naked: Revenue Up But Canadian Sales Vanish

Sales at Naked Brand Group rose 72.6% in the first quarter, but losses also rose by 40.3%.

Meanwhile, the company revealed a sudden disappearance in the last quarter of almost all of its Canadian sales, a troubling sign for a company that was founded in Canada, and where 21.5% of its business originated during its fiscal year ended January 31, 2016.

Overall, for the three months ended April 30, Naked reported a loss of $2.54 million on sales of $447,627 compared to a loss of $1.81 million on sales of $259,366 during the same period the year before. “As of April 30 2016, the company had not yet achieved profitable operations, had incurred a net loss of $2,540,095 and had an accumulated deficit of $48,921,175 and expects to incur significant further losses in the development of its business,” Naked stated in its quarterly filing.

Naked, which was incorporated in Canada in 2009, reported sales in that country of just $2,029 in the quarter ended April 30, 2016, less than 0.5% of its total for the three months. In the first quarter last year, Naked’s Canadian sales were $80,290 or 31.0% of its total.

In its filing Naked did not explain the evaporation of its Canadian business, but in its last two financial filings with the SEC (its annual report for last year and the most recent quarterly filing), the company no longer lists Hudson Bay and Holt Refrew (two large Canadian retailers) among the examples of prominent customers.

If the loss of its Canadian business turns out to be more than temporary, it would represent a significant setback for the firm. Naked reported Canadian sales of $213,443 in its fiscal year ended January 31, 2015 (or 38.3% of its total annual sales of $557,212) and $299,390 (or 21.5% of its annual sales of $1,389,414) for the full year ended January 31, 2016.

In response to questions about the sales decline emailed by BODY to Naked president Joel Primus, he answered, “We are always focused on customer satisfaction and are unable to provide the level of customer service we strive for until we open a warehouse in Canada. This is a temporary situation and do expect to return to our Canada [customers]. The product is still available online in Canada through our retail partners such as Nordstrom, Hudson Bay, Amazon and Bare Necessities. We greatly value the patience our Canadian customers have shown during this transition.”

In its SEC filing, Naked reported that in the first quarter, overall “Net sales increased significantly primarily as a result of our first shipments of women’s sleepwear, loungewear and intimate apparel collections to select department store and specialty store accounts. Certain of these products were available direct to consumer through our ecommerce store ( starting in August 2015 which sales increased by 250% to $105,000 from $30,000 in the quarter ended April 30, 2015. Also, we initiated wholesale deliveries, including our first groups of women’s bras and underwear, starting in February 2016. Sales of our women’s products at new accounts such as Bloomingdale’s and Dillard’s stores have been strong. As a result, we have already received purchase orders and planning indications from these stores for additional inventory and styles and expect to expand our store footprint with these accounts during 2016.”

The company also reported, “Sales of our men’s products continued to constitute the majority of our wholesale and ecommerce revenues. During the quarter ended April 30, 2016, men’s products constituted 55% of total sales. While we expect sales of our women’s products to grow more rapidly than sales of our men’s products, we believe several factors will contribute to the ongoing expansion of our men’s business: 1) the reduction of suggested retail prices for our core men’s underwear products which we completed in May 2016; 2) the launch of the Wade x Naked collection expected in the Fall of 2016; and 3) the introduction of new underwear and loungewear products for men, including the recent launch of products such as Naked Shield™ and a Peruvian pima cotton loungewear collection. During the period, we also sold off some overstock of men’s inventory through new off sales channels. We also received a $250,000 purchase order in May 2016 for a product test of a single style of men’s underwear from major retail store chain. This order is expected to ship in August 2016 and, if the test is successful, we believe this will represent a significant opportunity for sales growth.”


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