Naked Brand Group Inc (NASDAQ:NAKD) has been on the receiving end for the better part of the past leading to an underperformance that has seen the stock shed more than 50% in market value. However, recent price action points to a stock that is ready to break out, after bottoming out from all-time lows.
Naked Brand Group Price Action
After touching record lows of $1.11 a share in the first quarter, the stock has bounced back and is currently flirting with a key resistance level. The surge from lows has come at the back of high turnover in shares traded, underlining the fact that investors are starting to take note of the stock’s long-term prospects.
Naked Brand Group is currently trading at the $1.52 handle and needs to rise and stabilize above the $1.70 level, to break out from a tight trading range. Above the $1.70 handle, the stock would be on its way to the $2.20 handle, seen as another critical resistance level.
On the downside, the stock faces support at the $1.40 handle, on any sell-offs, below which it remains susceptible to drop further to the $1.28 level, seen as another crucial support level.
The upside momentum appears to have picked pace in recent weeks at the back of a number of key catalysts that seem to have strengthened investor confidence in the company. Before we look at the factors behind the recent price action, let’s first understand what Naked Brand Group does in pursuit of growth and shareholder value.
Naked Brand Group designs, manufacture and sells men’s and women’s underwear’s as well as intimate apparel and loungewear. In the recent past, the company has sought to expand its footprint into active wear, swimwear as well as sportswear among others. The firm sells its products through wholesale channels as well as direct-to-consumer and its online e-commerce store.
Naked Brand Group-Bendon Group Merger Push
One of the catalysts that has been pushing Naked Brand Group up the charts is the announcement that it is set to merge with Bendon Group Holdings, after the signing of a second amendment agreement. The merger will result in a combined company with a strong portfolio in the fashion and lifestyle brand space.
“We are pleased to have finalized this amendment and remain committed to completing the merger with Naked in due course. By combining these two companies, we expect to create a strong portfolio of innerwear, sleepwear, and swimwear brands, which we anticipate will, in turn, drive growth and strengthen our overall global industry position,” said Justin Davis-Rice, Bendon Executive Chairman.
Under the terms of the agreement, Naked Brand Group stockholders are to receive 9% of the outstanding shares of Bendon Group Holdings once the deal closes. Bendon Group, on the other hand, is to pay an amount equal to Naked’s operating loss until the merger closes.
In addition, the two companies are to work together to optimize all costs as they focus on the strategic growth of Naked’s business.
One of the key conditions for the merger to be consummated involves Bendon Group Holdings which is a private company getting approval to list in the Nasdaq Capital Market. Naked Shareholders will also have to approve the deal.
Naked Brand Group and Bendon Holdings limited have since filed with the Securities and Exchange Commission supplemental proxy materials. The two have set June 11, 2018, as the date when Naked Brand Group’s stockholders will meet to vote among other things, the adoption of the Agreement and planned merger of the two companies.
Bendon Holdings has been on an acquisition spree in recent years. Last year, the global leader in Intimate apparel and swimwear entered into an agreement to acquire FOH Online, the exclusive licensee of Frederick’s of Hollywood global online license.
According to Naked Brand Group Director Justin Davis-Rice, the merger will be an excellent complement to the portfolio. He expects the merger to lead to a robust platform for the next phase of online growth of the business.
“We look forward to working closely with the Frederick’s of Hollywood team to create an exceptional offering for the brand’s loyal customers. In addition, we believe that there is great opportunity to leverage our well-established global wholesale and retail distribution channels,” said Mr. Davis-Rice.
What Next For Naked Brand Group
The highly anticipated merger between Naked Brand Group and Bendon Group Holdings remains the main catalyst expected to continue pushing the stock up the charts. The merger should result in a combined company wielding too much power on the sale of intimate apparel and swimwear. In addition, FOH Holdings is set to strengthen the combined company’s e-commerce play as focus moves to targeting customers on online purchases.
It goes without saying that Naked Brand Group is headed in the right direction backed by a strategic plan that can drive sales, strengthen the company’s bottom line and in the process lead to more shareholder value. The future looks bright for the company as the worst appears to be behind, depicted by the recent share price action.
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Disclosure: We have no position in NAKD and have not been compensated for this article.