Naked Brand Group Ltd (NASDAQ: NAKD) announced big news this morning. In a press release issued about an hour ago, the company said that it has entered into a letter of intent to acquire a leading U.S. retailer. Today, we’ll talk about:
- The acquisition news;
- why the news is important for NAKD; and
- what we’ll be watching for ahead.
NAKD Announces Acquisition News
As mentioned above, Naked Brand Group announced in a press release this morning that it has entered into a non-binding letter of intent. The letter is regarding the acquisition of a leading United States online retailer of women’s apparel.
In the release, NAKD announced that it expects for the purchase price will be $42.5 million, including cash, stock and assumption of approximately $6.1 million of the retailer’s debt.
This acquisition is a highly accretive one. In fact, combined with the company’s existing Frederick’s of Hollywood e-Commerce license revenue (36% growth in the last 12 months), the transaction is expected to bring NAKD to revenues of more than $70 million for the 2019 fiscal year. The company also said that it is expecting for the combined e-Commerce business to generate a projected EBITDA contribution of $11.3 million and net income of around $5.3 million in 2019. In a statement, Justin Davis-Rice, CEO at NAKD, had the following to offer:
We are continuing to make strides in our digital and e-Commerce focused strategy that we believe will accelerate our growth trajectory and drive meaningful EBITDA contribution in FY2019… The acquisition would augment our proprietary digital operating platform to create ongoing synergies that we believe will produce over $70 million in e-Commerce revenues in the United States for FY2019 and will be accretive to Naked shareholders over the long term.
Why This News Is Important
There’s no question among consumers that they way we shop is changing. Online shopping is growing at massive rates, and the intimate apparel industry is doing the same. In fact, the industry is expected to grow to become a $250 billion one by 2022.
In previous articles, we’ve mentioned that this industry is a highly fragmented one and that Naked Brand Group’s goal was essentially defragmentation of this industry. Of course, this takes place through accretive acquisitions and growth in the various brands the company controls.
With the acquisition of this online retailer, the company is one step closer in doing what it has set out to do, consolidate a fragmented industry. At the same time, in doing so, the company is projecting strong revenue growth in its e-Commerce business, making the transaction an incredibly appealing one when we dig in.
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NAKD. In particular, we’re interested in following the story surrounding the company’s continued consolidation of the intimate apparel industry and the revenue growth the company experiences as a result. Nonetheless, we’ll continue to follow the news closely and bring it to you as it breaks!
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