Trade Idea: NAKD

5/25/17

Good Morning!

This is a trade update regarding our most recent NASDAQ trade opportunity – NAKD.

Just this morning NAKD released news that have thus far sent shares surging higher in premarket trading to a high thus far of 3.30, upside of 30%.

As a reminder, we alerted NAKD on May 23rd when the company was trading around 2.52 on average.

Today the company announced the following news this morning:

Naked Brand Group and Bendon Limited Enter into Agreement and Plan of Reorganization

NEW YORK–(BUSINESS WIRE)–

Naked Brand Group Inc. (NAKD) (“Naked”), an innovative fashion and lifestyle brand, and privately held Bendon Limited (“Bendon”), a global leader in intimate apparel and swimwear, today jointly announced that they have entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) pursuant to which Naked’s shareholders will, upon the closing of the merger, receive approximately 7% of the outstanding ordinary shares of the combined company on a fully diluted basis, subject to adjustment.

Carole Hochman, Naked’s Chief Executive Officer and Chief Creative Officer, stated, “We are pleased to have reached a definitive agreement with Bendon, which is the culmination of much hard work. We believe that this merger is structured to benefit our shareholders as well as the go-forward business. We look forward to closing this transaction in due course.”

Justin Davis-Rice, Executive Chairman of Bendon, commented, “This transformative merger will create a powerful portfolio of iconic innerwear, sleepwear, and swimwear brands. We believe this merger will enable the combined company to strengthen its global industry leadership and continue to drive growth over the long-term.”

Pursuant to the Merger Agreement, Naked and Bendon, respectively, will become wholly owned subsidiaries of Bendon Group Holdings Limited, a newly formed Australian holding company (“Holdco”), and the shareholders of Bendon and the stockholders of Naked, respectively, will become the shareholders of Holdco.

The Merger Agreement, which has been approved by the board of directors of both Naked and Bendon, is subject to approval by Naked’s stockholders and other customary closing conditions and regulatory approvals, including the filing and effectiveness of a registration statement with the Securities and Exchange Commission (the “SEC”) and the listing of Holdco’s ordinary shares on Nasdaq or the NYSE and is expected to be completed by the end of October 2017.

For additional information on the transaction, see Naked’s Current Report on Form 8-K, which will be filed promptly and which can be obtained, without charge, at the SEC’s internet site (http://www.sec.gov).

Duane Morris LLP is serving as legal counsel to Naked. Graubard Miller, Russell McVeagh and Wynn Williams are serving as legal counsel to Bendon and Holdco.

Source: Yahoo Finance

Here is our original report below.

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Good Morning!

We are continuing to monitor our last trade idea. Thus far it has not presented tangible gains. There continues to exist increased upside opportunity once it breaks above the critical 20 day moving average and sustains this level.

We would like to shift your attention in the meantime to a trade idea we brought to your attention for the first time in February – NAKD.

We alerted NAKD to your attention following an announcement by the company of a proposed merger with Bendon Limited, “a global leader in intimate apparel and swimwear renowned for best in category technology and design throughout its 70 year history”.

At the time we stated the following: “While there is no certainty in the outcome, this could potentially be a catalyst for experiencing increased upside opportunity.”

It has taken time for the merger to finalize, as the company announced the following on April 11th:

  • “…Naked will merge into a subsidiary of a newly formed Australian holding company (“NewCo”) and the shareholders of Naked and Bendon, respectively, will be issued shares of NewCo, which will become the new public company following consummation of the proposed transactions.”
  • “As a result of the changes in the structure of the Business Combination, the parties have agreed in Amendment No. 3 to extend the deadline by which they are required to enter into a definitive agreement until May 26, 2017.”

Technical Chart:

Following the company’s initial announcement of the proposed merger on January 13th, NAKD rallied from an open of 1.55 to a high of 3.68 in 1 day for upside of 137%.

After a few weeks of consolidation NAKD once again rallied incredibly on February 2nd from an open of 1.26 to a high of 2.97 for upside of 135%.

In the past few weeks, NAKD appears to have decisively crossed above both its 20 and 50 day moving averages, a potentially bullish indication.

In the event that NAKD can cross above the 2.45-2.50 range on momentum and sustain this level, based on the historical chart, this could suggest the opportunity for significant gains.

Chart:

 

Recent News:

Naked Brand Group Announces Fourth Quarter and Fiscal Year Results

NEW YORK–(BUSINESS WIRE)–

Naked Brand Group Inc. (NAKD) (“Naked” or the “Company”), an innovative fashion and lifestyle brand, today announced financial results for its fourth quarter and fiscal year ended January 31, 2017.

Fourth Quarter Results

For the fourth quarter of fiscal 2017, net sales increased by 21.9% to $0.55 million, compared to $0.45 million for the fourth quarter of fiscal 2016. The sales growth was driven primarily by increases in sales to specialty and retail accounts, as well as third-party eCommerce sites, in addition to sales of out of season and overstock inventory through the off-price sales channel.

Gross margin was 49.3% for the fourth quarter of fiscal 2017, compared to (39.0)% for the same period of fiscal 2016. The increase was primarily due to enhanced production efficiencies, as well as a product mix shift benefit. In the fourth quarter of fiscal 2016, gross profit was negatively impacted by a $0.3 million inventory write-down to reduce inventory to estimated net realizable values, which arose as a result of seasonality and product line changes.

For the fourth quarter of fiscal 2017, the Company’s operating loss was $2.6 million, compared to an operating loss of $3.2 million for the same period of fiscal 2016.

Net loss for the fourth quarter of fiscal 2017 was $2.6 million, or $0.42 per share, compared to a net loss of $10.6 million, or $2.94 per share, for the fourth quarter of fiscal 2016. The net loss for both fourth quarter of fiscal 2017 and fourth quarter of fiscal 2016 included $1.3 million in non-cash stock option compensation charges.

Full Fiscal Year Results

For the year ended January 31, 2017, net sales increased by 32.6% to $1.8 million, compared to $1.4 million for the year ended January 31, 2016. Gross margin was 20.5% for the fiscal year 2017, compared to 7.1% for the fiscal year 2016.

The net loss for fiscal year 2017 was $10.8 million, or $1.77 per share, compared to a net loss of $19.1 million, or $10.13 per share, for fiscal year 2016. The fiscal year 2017 net loss included $5.3 million in non-cash stock option compensation charges, compared to $5.6 million of non-cash stock option compensation charges in fiscal year 2016.

Balance Sheet Summary

Total cash and cash equivalents at January 31, 2017 were $0.9 million compared to $4.8 million at January 31, 2016. As previously disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on April 11, 2017, subsequent to fiscal year-end, the Company completed an “at-the-market” offering for gross proceeds of $5.5 million through the sale of 2,189,052 shares of the Company’s common stock at an average price of $2.51 per share.

The Company ended fiscal year 2017 with $2.2 million of inventory on hand compared to $0.9 million for the same period of fiscal 2016. The increase was the result of the procurement of additional collections, including the women’s intimates and Wade X Naked collections.

Events Subsequent to the Fourth Quarter

As previously disclosed in its Current Report on Form 8-K filed with the SEC on March 20, 2017, On March 17, 2017, the Company was informed by the Listing Qualifications Staff of the Nasdaq Stock Market that the Company had regained compliance with Nasdaq’s minimum stockholders’ equity listing requirement.

As previously disclosed in its Current Report on Form 8-K filed with the SEC on April 11, 2017, on April 10, 2017, the Company entered into Amendment No. 3 to the Letter of Intent with Bendon Limited for a proposed business combination. This most recent amendment includes $34 million in positive adjustments to the net debt target for the anticipated combined company’s balance sheet at the close of the transaction, with total net debt of approximately $13 million compared to the previously contemplated total net debt of approximately $51 million.

Source: Yahoo Finance

About NAKD:

Naked was founded on one basic desire–to create a new standard for how products worn close to the skin fit, feel, and function. Naked’s women’s and men’s collections are available at www.wearnaked.com, and Naked has a growing retail footprint for its innovative and luxurious innerwear products in some of the leading online and department stores in North America including Nordstrom, Bloomingdale’s, Dillard’s, Soma, Saks Fifth Avenue, Amazon.com, BareNecessities.com, and more.

 In 2014, renowned designer and sleepwear pioneer Carole Hochman joined Naked as Chief Executive Officer, Chief Creative Officer, and Chairwoman with the goal of growing Naked into a global lifestyle brand.

In June 2015, Naked announced a strategic partnership with NBA Miami HEAT (now Chicago Bulls) star Dwyane Wade. The 3-time NBA Champion, 11-time All Star, and Olympic Gold Medalist joined Naked’s Advisory Board, and is the Creative Director for a signature collection of men’s innerwear which launched in 2016.

Naked is headquartered in New York City and plans to expand in the future into other apparel and product categories that can exemplify the mission of the brand, such as activewear, swimwear, sportswear and more.

Source: Yahoo Finance

If you are not familiar with my trading guidelines, please read them below. These trading guidelines are designed to give you a starting point to develop your own personal trading philosophy and approach.

Since every traders/investors circumstance is different, make sure you create a personalized approach that works for you and always consult a financial adviser (not me).

Happy Trading!

Ultimate Stock Alerts 

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Trading Rules [Please Review Before Taking Any Action]:

  1. Do not invest more than you are willing to lose. No one likes to consider the worst case, but it’s always a risk that exists. Rule of thumb – if you cannot sleep at night as a consequence of your investment, then you have over invested.
  2. Keep calm. Do not chase. Decide for yourself if you like the trade. If you are not comfortable with the perceived risks, stay out. Timelines are to be decided by you. Approach methodically, and seek technical confirmation for direction. Always trade with a strategy in mind.
  3. Never use market orders. Only use buy and sell limit orders. Protecting your investment is more important than missing gains. Use “trailing stop %” or “trailing stop limit” orders. Personally I prefer mental stops while actively managing trades rather than entering your stop into your brokerage account.
  4. Cut losses quickly when day/swing trading. It’s better to acknowledge being wrong than to have false hope. Sometimes you will be wrong in doing so, often times it will save you. It all depends on your entry.
  5. Actively manage all your investments & trade during market hours only. Trading during pre/post market hours carries greater volatility/risk.

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