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Naked Reports Big Loss As Sales Rise 149%

(Filed Under Financial and General Interest News). Naked Brand Group sales rose to $1,389,414 for the year ended January 31, 2016, a 149% increase from $557,212 the year before.

Meanwhile, the company posted another huge loss for the year, $19.1 million, compared to a loss of $21.1 million for the year ended January 31, 2015. It added, in its annual report, that it anticipates “generating losses for at least the next 12 months,” as it attempts to expand its business.

Sleepwear expert Carole Hochman joined the public company in June of 2014, bringing in cash of her own, additional investors and a new management team. One of those new executives, CFO and COO Michael Flanagan, resigned abruptly in March.

Naked pointed out that the sales increase of $832,202 in fiscal 2016 (the year ended this January 31) came “primarily as a result of the launch of our redesigned and expanded 2015 men’s collection in the first quarter of fiscal 2016, resulting in large initial bulk up orders and increased replenishment sales to Nordstrom and other stores.”

Elsewhere in the annual report, however, it revealed a growing and lopsided dependence on Nordstrom, noting that last year the store “accounted for 41% of our sales” up from “28% of our sales” the year before. “Nordstrom is currently of key importance to our business and our results of operations, which would be materially adversely affected if this relationship ceased.”

In explaining its most recent results, Naked reported “financing and accretion charges of $7,255,347” rose from $2,425,697 in the year ended January 31, 2015. In addition, “operating expenses” rose to $11,726,989, up from $6,690,553 the year earlier.

The report pictured the rapid creation of a large, expensive company now hoping to achieve a sales volume to match its new size. Several interesting tidbits are also provided.

In a section discussing its factor, Capital Business Credit, the Naked report revealed the depth of Carole Hochman’s devotion to her new venture. “At January 31, 2016, an amount of $527,711 was owing under the terms of the factoring agreement, for advances made, net of repayments of such advances through the collection of factored receivables. Ms. Hochman entered into a guaranty in favor of the factor pursuant to which Ms. Hochman guaranteed repayment of our indebtedness and performance of our obligations under the factoring agreement. Ms. Hochman also provided side collateral of $500,000 to support a portion of the borrowings.”

Naked reported that its “primary production partner during 2016 has been TMS Fashion, a wholly owned subsidiary of LuenThai Holdings Limited, a Hong Kong Stock Exchange listed company with 2015 revenues of over $1.1 billion. We began working with TMS and LuenThai in 2014 in an effort to streamline and scale up our production capabilities for current and future products by leveraging a large, proven manufacturing resource. We believe this partnership allows us access to the best in class fabrics, materials and manufacturing techniques while reducing our need for fixed overhead. Further, we sublet our principal office location in New York City from Tellas, Inc., another wholly-owned subsidiary of LuenThai operating in the U.S.” The company stated it had “additional manufacturing relationships for our women’s intimate apparel collections and expect to work with additional manufacturers as we expand to include additional products and product categories.”

Naked described its expensive endorsement deal signed in June, 2015 with basketball player Dwyane Wade in the annual report, but also listed as a “risk factor” the possibility that it might not be able to sign others. “If we are unable to obtain or maintain our endorsements by professional athletes and celebrities, our ability to market and sell our products may be harmed. An important element of our marketing strategy may be to obtain endorsements from prominent athletes and celebrities, which contribute to the image of our brands.”

The annual report also contained this vague general plan for the company that first started with men’s underwear. “The U.S. innerwear market, which is the core focus of our current commercial strategy, represented an estimated $23.1 billion in retail sales in the twelve-month period ended March 2015 according to data from NPD Group, Inc. Our expansion into the women’s sleepwear and intimate apparel market is a key part of our growth strategy given that these market segments represent $17.8 billion, or over 77% of the overall innerwear market according to the NPD Group data. Daywear products that address consumer demand for versatile “athleisure” apparel – similar to several in our Fall 2015 women’s collection – have been the fastest growing segment of the women’s market. Our ability to attract women customers for the Naked brand is also very important to our effort to penetrate the men’s $4.3 billion U.S. innerwear market since a number of consumer research reports show that women purchase as much as 50% of men’s underwear for their husbands, boyfriends or sons.”

more Financial and General Interest News >>

Published 05-03-2016 by Nick Monjo

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