Naked Brand Group Ltd (NASDAQ:NAKD) resurgence is gathering pace. A 25% rally from a record low coincides with the confirmation of new strategic initiatives as the company seeks to reinvigorate its growth metrics.
NASDAQ:NAKD Price Analysis
Restructuring efforts are proceeding well as the company continues to execute cost savings plays in a bid to shore the bottom line. In addition, exit from unprofitable business channels in the UK as well as the EU, Australia and New Zeeland also continue to strengthen the stock’s market sentiments.
The stock has since bounced off the $0.04 trading level, amidst an upsurge in traded shares in the market. The bounce-back coincides with an uptick in market sentiments signaling renewed investor interest after the underperformance of the past few months. At current levels, NAKD looks to be a good risk/reward opportunity.
Naked Brand casts itself as a leading distributor of intimate apparel and swimwear. The company designs manufactures and distributes 11 owned and licensed brands catering to cross-section consumer markets. Some of its notable brands include Bendon and Heidi Klum Intimates.
NASDAQ:NAKD market sentiments have inched higher in recent weeks on the confirmation of a restructuring drive that seeks to affirm and strengthen the company’s growth metrics. The company is currently working on a strategic brand divestiture initiative. The initiative will result in the sale of one or more brands as the company seeks to be asset-light to focus on high margin segments.
The company has also resorted to a consumer business model that focuses on strategic wholesale partners. Conversely, the apparel company has reduced trade payable to creditors by 51%. New financing initiatives have also allowed Naked Brand Group to clear significant amount of supplier payables.
In addition, the financing initiatives have provided the company with additional cash to stock channels leading to a sufficient inventory level. The company has already increased its inventory levels by 25% to meet the growing market demand and generate significant revenues in the process.
“Financially, our restructuring efforts are proceeding as planned, and cost savings are being realized as expected. Through a continuation of these efforts and further structure changes, we now expect to deliver a total forecasted SG&A savings of over $12.8 million through to FY21,” said CEO Anna Johnson.
Naked Brand Group has also revamped its in-store initiatives as part of the restructuring drive. As part of a new go-to-market strategy, the company is in the process of investing in its marketing spend in a bid to drive positive return on investments. Store layout changes, as well as new marketing efforts, are in the pipeline as the company seeks to drive customer conversion to the 30-40% range
In view of the restructuring drive, the Chief Executive Officer remains confident that Naked Brand Group is on its way to accomplishing cash flow break-even in the second half of the year. As of the end of the first half of the year, the company had $3.9 million in strategic financing that should allow it to implement strategic initiatives needed to spur growth. The company has also attracted a $1.5 million investment from TokenPay, which invests in firms that incorporate blockchain solutions in their products and services.
Naked Brand restructuring drive alludes to a company focused on reinvigorating growth metrics and long-term prospects. The company has made impressive strides in exiting unprofitable channels in Europe to focus where it has the potential to generate long-term value. Cost cuts have also come into play through the downsizing of unprofitable operations as well as operations in some markets.
That said the company is in a transitional period, but with tremendous potential as it embarks on an aggressive marketing campaign. High inventory levels leave the company well-positioned to generate significant revenues given the strong demand in the market.
That said NASDAQ:NAKD looks set to continue climbing the ladder as investors take note of the improving underlying fundamentals. A combination of recent strong price performance off the lows and favorable technicals suggest the stock is on the recovery path.
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Disclosure: We have no position in NASDAQ:NAKD and have not been compensated for this article.