Over the years, I’ve generally had a pessimistic view of Naked Brand Group (NASDAQ:NAKD). Though in some contexts, it’s an interesting idea — and certainly, researching its financials on the company’s website is even more interesting — NAKD stock lacks distinction in one of the toughest consumer retail subsegments.

Lingerie on a pink background.

Source: NazarBazar/Shutterstock.com

As I mentioned in a relatively recent write-up for the company, millennials have become brand agnostic regarding their fashion choices. Unlike prior generations, younger folks today don’t necessarily want to be walking billboards for big corporate interests. Instead, both millennials and generation Z care about relevant social issues. In many cases, they spend their dollars accordingly.

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Now, it’s not too clear to me whether Naked Brand cates to the environmental, social and governance (ESG) ethos. But as our own Alex Sirois mentioned, the company is really banking on its subsidiary Frederick’s of Hollywood. That might have been a big deal 15 years ago. I’m just not sure if it’s the brand that’s going to bolster NAKD stock.

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After all, if millennials don’t care about outward fashion, then it stands to reason that they’re really not going to care about interior fashion, so to speak.

Nevertheless, Sirois argues that if you believe in comeback stories, you may want to give NAKD stock another look. Primarily, Naked Brand has an opportunity to transition its Frederick’s brand — which in addition to intimates products also specializes in swimwear and related accessories — into an e-commerce powerhouse.

Thinking it through, Sirois may have a point here. With pent-up demand rising from the Covid-19-fueled lockdowns and mitigation measures, customers want to take advantage of their newfound freedoms. In large part, this involves going out and vacationing.

Especially during the summer, you’d expect swimwear sales to rise, which could help NAKD stock. Then add in that customers have been focusing on e-commerce for the last year and a half and you’ve got your comeback story.

Story continuesA Tough Narrative Ahead for NAKD Stock

Still, I don’t think it’s going to be a simple upward journey for NAKD stock. For investors that want to bet on Davids that are going headfirst against Goliath-sized problems, Naked Brand does have an intriguing storyline, as I mentioned earlier. But it’s a risky one, so you may want to wait for further clarification.

Specifically, the pent-up demand argument is a potentially powerful one for the broader apparel industry. Data from the U.S. Census Bureau — specifically the Monthly Retail Trade numbers — shows that overall, product sales under the health and personal care stores segment have been steadily rising this year. The same observation applies for the clothing and related accessories stores segment.

Better yet for NAKD stock, Census Bureau data strongly suggests that women shoppers care exponentially more about their outward appearance than do male shoppers. For instance, in May and June of 2020, women’s clothing stores racked up sales of $3.1 billion. In comparison, men’s clothing stores tallied only $448 million over the same frame.

Thus, if you’re involved in the apparel business — and particularly during the Covid-19 crisis — the numbers don’t lie. It’s better to serve women than it is to serve men. But herein lies the problem for NAKD stock.

You’ve got to have faith that Naked Brand is the place for the lucrative female apparel market. Because as these national numbers are coming in, it’s evident that consumers are aiming to return to their normal purchasing habits. If so, there will be little excuse for Naked Brand if it can’t deliver the goods.

That’s why I suggest waiting on more news to clarify Naked’s fiscal performance. Of course, waiting for that could mean profitability loss if the numbers are indeed positive and shares rise as a result.

Not an Investment But Speculation

Still, it’s worth noting that NAKD stock benefits from an encouraging technical setup of higher highs. Since declining from its late January 2021 highs, here are the following closing prices on “bottomed” sessions:

  • April 16: 48 cents

  • May 12: 50 cents

  • May 24: 51 cents

  • July 19: 50 cents

On August 2, NAKD closed at 55 cents, representing progress in terms of its support line. But is this enough to wager on the company?

Personally, I don’t think it’s an investment. Naked has huge risks in terms of staying relevant in a competitive and saturated field. But it could be a viable short-term trade, so long as you acknowledge that disappointing financial performances could collapse this support trend in a hurry.

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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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