(Filed Under wholesale Men's Underwear News). Naked Brand Group sales improved during its latest quarter, but it reported a striking drop in department store sales, continued to lose money and surprised with a significant shift away from the men’s side of the underwear business.
Naked, which is close to merging with New Zealand-based Bendon, reported a smaller loss of $903,139 on higher sales of $620,928 in its third quarter, compared to the same period last year. In the three months ended October 31, 2016 the company lost $2,362,600 on sales of $551,494.
Despite the 12.6% increase in overall sales during the quarter, Naked suffered a dramatic drop in department store sales and sales on its own website. Department store sales dropped 36.5% to $169,100 for the three months ended October 31, 2017, compared to $266,300 during the same period in 2016. “The reason for the decrease in department store sales is as a result of (i) the loss of Nordstrom in store accounts, (ii) the overall percentage increase of sales to other channels,” the company claimed in its report.
Naked added, “Overall increases in sales for the period were most significantly driven by an increase in sales to third party ecommerce sales including the addition of Amazon, off-price store sales including a large sale of women’s off-price inventory to HauteLook, and an increase in overall specialty store accounts.”
Naked did not provide an explanation for the 12.1% drop in sales to consumers on its own web platform. It stated, “Net sales through our ecommerce store (www.wearnaked.com) were approximately $87,500 for the third quarter ended October 31, 2017 compared to $99,600 during the same period in fiscal 2016,” adding, “Sales through our ecommerce store accounted for approximately 14.1% of total net sales in 2017 as compared to 18.1% of total net sales in 2016.”
“Net sales through third party ecommerce sites increased to approximately $64,600 for the third quarter ended October 31, 2017 compared to $14,500 in the same period in fiscal 2016, an increase of 345.8%. Sales through these channels accounted for approximately 10.4% of total net sales in 2017 as compared to 2.6% of total net sales in 2016. This increase is attributable to new third-party ecommerce accounts added in fiscal 2017, specifically the addition of Amazon. Sales to retail and specialty store accounts constituted approximately $201,200, or 32.4% of total net sales in 2017, as compared to $145,800, or 26.4% of total net sales in 2016. Total sales to retail and specialty store sales increased by approximately 38% over the comparative year, due to the addition of accounts.”
During the quarter there was a dramatic increase in sales to discount stores. “During the three-month period ended October 31, 2017, we sold approximately $96,500 in out of season and overstock inventory through off price sales channels, compared to $25,200 in the same period of 2016. Sales to these customers accounted for approximately 15.5% of total net sales in the current quarter, as compared to 4.6% of total net sales in the comparative quarter in 2016.”
In a dramatic turn for a public company with its origins in men’s underwear, Naked’s sales of men’s products plummeted to just 20.9% of its total during the quarter and it announced the end of its licensing deal with basketball star Dwyane Wade. No explanation was given, but the company emphasized, “We continue to see most of our growth driven by our women’s collections.” As recently as the quarter ended April 30, 2016, men’s products constituted 55% of total sales.
In reporting the December 7th signing of the termination agreement with Wade Enterprises, LLC it said it paid “$200,000 cash to Wade which [included] a one-time royalty payment of $150,000 and $50,000 to re-purchase 365,688 warrants and 36,569 anti-dilution warrants held by Wade.”
For the first nine months this year the company has lost $5,716,874 on sales of $1,746,644 compared to a loss of $8,204,475 on sales of 1,292,132 in the same period in 2016. Overall, Naked said, as of October 31st, it had “an accumulated deficit of $62,896,457 and expects to incur significant further losses in the development of its business.”
Naked appears close to its announced merger with Bendon and is currently sharing offices with that company. — NM
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