Naked Sales Fall 26%, Losses Hit $18.8 Million

Naked Brand Group Limited sales plunged to 42,094,000 New Zealand dollars ($27.6 million) in the first six months of 2019, down 26% from 56,750,000 New Zealand dollars ($37.2 million) in the same six months in 2018.

Company losses for the period climbed to 28,729,000 NZ ($18.8 million), up from 26,094,000 NZ ($17.1 million) in the six months ended July 31, 2018.

Last September the company reported “operational highlights” for the first six months of 2019, but delayed releasing the actual financial results until now. Last fall it listed a range of measures it was taking to improve the company’s financial picture and listed them again.

For the six months, Naked reported “Sales were down in all markets except US Wholesale and e-commerce,” adding, “sales continued to be impacted by the lack of current season stock supply due to past significant cash flow restraints and timing to rebuild inventory levels.”

Naked explained its “net loss was mainly due to the impact of lower sales resulting largely from inventory cash funding constraints, as well as impairment costs and transaction expenses related mainly to the issue of shares to manufacturers, all partially offset by improved gross margin percentage, and lower costs in proportion to lower sales and additional cost savings.”

Naked’s share price has fallen dramatically over the last several months. On August 31, 2018 it closed at $4.08 and slid steadily thereafter. As of December 19, 2019 it was down to $.0258. To comply with a NASDAQ Stock Market listing requirement that calls for a minimum $1.00 bid price per share, the company, on December 20, 2019, “completed a reverse stock split of our ordinary shares, pursuant to which every 100 ordinary shares outstanding as of the effective time of the reverse stock split were combined into one ordinary share.” That raised the new share price to a close of $2.14 on December 20. But as of the close of January 9, 2020 the share price was down to $1.88.

While Naked’s CEO Anna Johnson pointed to “positive results” with the company’s “lean, direct-to-consumer business model” in her January remarks, company did not provide actual details about its E-commerce business during the six months ended July 31, 2019.

The E-commerce reporting from previous years, that was included in the current report, spoke of losses. “For the 12-months ended January 31, 2019 the e-commerce EBITDA was a loss of $0.2m compared with a loss of $0.3m for the 12-months ended January 31, 2018. The loss for this period was impacted by the reduction in gross margin between the 12-month period to January 31, 2019 and 12-month period to January 31, 2018 from 34.9% to 33.9%, sales are comparable year on year. For the 12-months ended January 31, 2018 our e-commerce EBITDA was a loss of $0.3m compared with a profit of $4.5m for the 12-months ended January 31, 2017. The loss for this period is due to decrease in margin as a result of the new license fee under the license agreement with FOH [Fredericks of Hollywood] and discounts offered to customers. E-commerce Gross margin reduced 11.5% between the 12-month period to January 31, 2018 and 12-month period to January 31, 2017 from 46.4% to 34.9%.”

The company explained that its E-commerce segment “covers the group’s online retail activities. E commerce revenue for the periods ended 31 January 2019, 31 January 2018 and 31 January 2017 include revenue from a US brand called Fredericks of Hollywood for which Bendon Limited currently has a licence agreement.” — NM