The shares of Digital Brands Group, Inc. (NASDAQ: DBGI) demonstrated a noteworthy surge during the extended trading session on Tuesday, marking a robust 6.37% increase to reach $2.67. This upswing followed a regular-session 3.50% rise, concluding Digital Brands’ stock at $2.51. The impetus for this surge in DBGI stock can be attributed to the company’s recent disclosure of expansion initiatives.
Digital Brands (DBGI) has outlined its intention to inaugurate 50 retail establishments over the next few years, financing this venture through its internal free cash flow. The company has diligently assessed potential store locations and lease agreements in collaboration with prominent retail developers.
DBGI is sanguine about the substantial enhancement of brand visibility, cost-effective customer acquisition, augmented average basket size, and heightened customer retention that retail stores can bring. Based on the anticipated metrics from these establishments, Digital Brands envisions an annual revenue exceeding $1.5 million per store with positive cash flow at the store level.
Extrapolating from the 50-store strategy, DBGI anticipates an aggregate annual revenue surpassing $75 million and consequential store-level cash flow. Furthermore, these planned retail stores are anticipated to bolster revenue across Digital Brands’ wholesale and e-commerce channels, drawing insights from the performance of similar brands with retail presence.
In a recent development, Digital Brands has formalized its commitment to opening its inaugural retail store in March, projecting annual revenue surpassing $1.5 million and annual cash flow exceeding $500,000. These estimates are derived from historical metrics and the performance of this particular store, considering excess Sundry inventory preceding the acquisition.
DBGI strategically plans to utilize this retail outlet to liquidate surplus inventory, realizing significantly higher profit margins compared to off-price channel sales. Notably, DBG has inherited a substantial amount of excess inventory through its Sundry acquisition, with no additional costs associated, as these units have already been paid for and are housed in its warehouse.
Consequently, the company foresees substantial annual cash flow exceeding $500,000 from this store. The decision to initiate with an outlet location is rooted in the availability of finished goods inventory already paid for and stored in the warehouse, coupled with the favorable historical metrics and performance of this store.
With its digitally-first narrative approach, the curated collection of luxury lifestyle brands Digital Brands Groups Inc. (DBGI) has continued meaningful growth. But despite being an impressive company in a hyper-growth mode, DBGI stock has been getting a severe beat down. The stock has been pushed down over 89% in the past six months and roughly 94% in twelve.
The company has so far been doing all the right things with continued all-time revenue records, successful acquisitions of brands with revenue, and a recent capital raise netting in $9.3 million in cash for it. The company is listed on Amazon as well and even accepts cryptocurrency as a form of payment. The latest includes quarterly earnings with humongous YOY improvement across all elements, from revenue to gross margin to a loss per share and upbeat guidance. While being severely beaten down, luckily, the latest earning report has the stock continuing a bullish trend.
Source: LoveToKnow
On May 16, DBGI was trending in the green with gains of 4.18% prior to the earnings, which converted into 5.82% in the pre-market following the announcement. Thus, the stock was then trading at a value of $0.2635 apiece. The earlier session had it valued at a price of $0.2490.
Overview of DBGI
The company has a novel business model that has supported both organic and inorganic growth. Being a digitally native-first vertical brand, the company goes into the perils of sourcing its products directly from third-party manufacturers and selling directly to the end consumers while also controlling its own distribution. Its business model has led to continued repeat orders and cross-merchandising across its numerous brands. It also leverages all three channels of websites, wholesale and DBGI stores for its brand portfolio.
On top of it, DBGI’s M&A strategy has it offering DSTLD, Bailey 44, Harper & Jones, and Stateside brands with the next crown jewel being Sundry. Acquired in 2021, Harper & Jones AND Stateside have performed exceptionally well for the company so far. Early this year in January, the company entered into a definitive agreement for acquiring the women’s lifestyle brand Sundry. Sundry brings a strong position with $18.2 million generated in revenues in the first nine months of 2021 (an increase of 37.9% YOY) with a net income of $2.7 million (up 11.7% YOY). Expected to close in the ongoing quarter, the acquisition will add significant revenue and profit along with a popular brand name to DBGI’s portfolio.
The Latest Earnings of DBGI
On Monday, the digital-first lifestyles brands company came out with an earnings report for the first quarter of 2022. The quarterly sales surged by a huge 740% YOY to reach $3.4 million while the year-ago sales were $0.4 million.
A stark increase was also reported on the gross profit margin front as it grew by a vast 671% YOY to 42.9% in Q1 2022. Comparatively, the figure was negative 50.8% in the same period of the prior year. Improved gross margin across all of its brands was the driver behind the huge jump.
Despite including a non-cash expense of $3.0 million due to a change in the fair value of contingent liabilities ad amortization of loan discounts, the quarterly net loss per diluted share shrunk to 59 cents. This came down from $4.55 per diluted share in Q1 2021. The total net loss was $7.8 million in Q1 2022 against the year-ago’s $3.0 million.
Furthermore, the total operating expenses widened to roughly $7 million, while the loss of operation extended to $5.6 million in the quarter.
The company now expects to attain revenues of $37.5 million to $42.5 million for 2022. And this forecast is further stretched to revenues eclipsing the $50 million level post the acquisition of Sundry which is expected in the ongoing quarter.
Recent Capital Raise
Recently, the company raised over $9.3 million in an underwritten public offering in early May, which closed on May 10. With Alexander Capital, L.P., and Revere Securities, LLC by its side, the company sold 37,389,800 common stock shares at a price of $0.25 per share in the offering while an additional option for purchasing 5,608,470 shares was also granted.
Even after deducting the repayment of the promissory notes worth the principal amount of $3,068,750, the company will be left with enough proceeds to continue its acquisition shopping spree. To potentially become EBITDA positive by 2023, DBGI will most probably continue diversifying its portfolio of offerings by acquiring more EBITDA positive and revenue-generating brands as it has done so far under its consumer acquisition strategies and plans to do in the future as well.
Company & DBGI Stock Ratings
In a recent research report by Goldman Small Cap Research, on DBGI, Rob Goldman called the company vastly undervalued but set to become one of the leading and fast-growing companies in its industry. The company’s sales grew by 44% from 2020 to 2021 and by a soaring 740% from Q1 2021 to Q1 2022 as per the latest. But despite this, the stock has a price/sales ratio of just 0.5x on projected sales for 2022. According to the report, sales of the company are expected to reach $52 million in 2022 and a staggering $87 million in 2023 from just $7.5 million in 2021. The report also forecast an operating profit of $2 million for 2023 along with annual EBITDA profitability, while EBITDA profit is anticipated to start in the ending quarter of 2022.
Additionally, the report gave a 12-month price target of $7 to DBGI due to its higher sales growth and potential for future M&A. The report also suggested a further increase in the target price following the execution of more deals by the company.
The stock and company projections in the report were even supported by a later article published in a digital journal. And DBGI has even been marked as one of the best penny stocks under $1 to buy for May 2022.
Conclusion
With a bullish rating, continued growth, and expansion in both its organic and inorganic sales, DBGI is expected to become EBITDA positive by 2023. While the stock has been severely beaten down as of late, despite the continued growth and development shown by the company, experts believe it to reach the $7 mark in the upcoming twelve months. The company is expected to emerge as the fastest-growing company in the industry and continue growing owing to its novel business model and its M&A strategy.
On May 6, 2022, Digital Brands Group Inc. (DBGI) shares fell to new lows after the company announced the pricing of its equity offering the day before. The stock declined by a huge 54.73% during the regular session to mark a new 52-week low of $0.2050. DBGI then closed the session at a price of $0.2250. This steep fall gave way to rebound energy as the dip in the stock price attracted investors. Hence, the stock rebounded in the after-hours as the investors started buying the dip. Thus, the stock entered green in the after-hours to trade at $0.2380 apiece after adding 5.78%.
Source: Footwear News
DBGI’s Equity Offering
Late on Thursday, the luxury lifestyle digital-first brands collection priced its underwritten public offering of 37.4 million shares at $0.25 apiece. Moreover, the equity offering also consists of a 45-day option for purchasing up to 5.4 million additional shares of DBGI’s common stock at the public offering price.
Expected to close on May 10, 2022, the offering will gather gross proceeds of roughly 9.34 million excluding the exercise of the 45-day option. The net proceeds from the offering are intended for use in general corporate purposes and as working capital to fund operations. Additionally, the proceeds will also be used in the repayment of promissory notes in the principal amount of $3,068,750.
The booking running manager for the offering is Alexander Capital, L.P. while Revere Securities, LLC is the co-manager.
A Quick Look at DBGI
From a performance and financial point of view, the company has been showing great progress but DBGI stock on the other hand has been harshly beaten down. As per its previous earnings, the company improved its quarterly revenue by a humungous 425% YOY while also reducing its net loss to $0.76 a share from $3.97 a year earlier. On top of this, the company said to have had a record growth of 776% YOY in January and February 2022 in its e-commerce revenue while the wholesale channel marked over 200% growth.
Furthermore, the company has also been working on expanding its portfolio with back-to-back acquisitions. After acquiring Harper & Jones and Stateside in 2021, DBGI acquired Sundry in early 2022.
Future Outlook
Given the positive EBITDA expectation on top of a huge 350% YOY revenue increase anticipation for 2022, DBGI is up for some nice gains. Even though the stock is down over 90% year-to-date, the company has much in store for continued growth.
The apparel provider, Digital Brands Group Inc. (DBGI) posted its 2021 financial results on March 31, 2022. While the company’s latest earnings did show some nice YOY improvement, investors remained unimpressed. Thus, in the most recent trading session, DBGI sank by 5.26% to trade at $1.80 per share. Comparatively, the earlier trading session recorded a gain of 6.15% at the sock’s closing price of $1.90. Both the session witnessed a good deal of shares that were above the usual traffic, marking 5.01 million for the regular and 1.69 million for the after-hours session.
Even though the stock stands on a year-to-date loss of 17.39%, it has been improving since last month.
Source: FDIC
DBGI’s 2021 Earnings Analysis
The Texas-based company reported a YOY growth of a mammoth 425% for the ending quarter of 2021. Thus, the reported revenue was valued at $4.0 million against the year-ago quarter’s $0.8 million.
Not just the revenue but the company’s gross profit margin and net loss also witnessed much improvement in the quarter. DBGI’s gross margin exponentially improved from a negative 4.8% to 42.2% in the quarter.
While the net loss was $9.7 million, the diluted EPS was $0.76 in Q4 2021. These values compare to the prior-year quarter’s $2.6 million net loss with negative EPS of $3.97.
Investors seem to have been looking forward to much more from the company as the reported improvement was not enough to sway them into buying the stock. With the inclusion of Stateside and Harper & Jones (Pro-forma basis), the investors expected further improvement.
According to previous reports, the company initially expected much better revenue for the quarter but supply-chain hurdles and global delays impacted it.
How Does the Current Quarter Look?
While the company did not provide any guidance for the ongoing quarter or year, recently it had posted Q1 2022’s progress. For the months of January and February alone, DBGI’s e-commerce revenue increased by 776%. Not only this but the wholesale channel also progressed with over 200% increased YOY for the two months.
In conclusion, while the 2021 earnings were not up to par for the investors, the current quarter’s progress thus far seems up to the mark. With such immense growth in just two months, Q1 2022 seems right on track for record revenue growth. With more acquisitions in a plan, the results are only expected to improve further from this point on.
Currently, DBGI is in the post definitive agreement period of acquiring Sundry. The company expects to complete the acquisition of the global lifestyle apparel brand in H1 2022.
Digital Brands Group, Inc. (DBGI) is an e-commerce-based business providing apparel under various brand names on a direct-to-client and wholesale basis. The company sources the manufactures from third-party producers and sells directly to consumers via its website. It also offers denim and luxury men’s suits under different brands.
The price of DBGI stock during the regular trading on March 7, 2022, was $1.96 with a phenomenal gain of 47.3%. At the last check in aftermarket, the stock plummeted by 18.3%.
DBGI: Events and Happenings
On March 7, 2022, DBGI reported that its e-commerce revenue development inclined by a record 776% YoY for January and February months. On February 01, 2022, DBGI updated on the participation of its CEO and CMO at the 24th Emerging Growth Conference held on February 2, 2022.
On January 20, 2022, DBGI announced its entry into a definitive combination contract for the acquisition of Sundry. The transaction is estimated to be closed in the first half of 2022. On January 7, 2022, DBGI provided the press with a fourth-quarter 2021 net revenue update. The company expected fourth-quarter 2021 revenue to be in line with its previous guidance of up to $4 million.
On December 9, 2021, DBGI announced the unveiling of an exclusive branded offer on the Google Pay App, which was relaunched with all new features.
DBGI: Key Financials
On November 11, 2021, DBGI released its Q3 2021 consolidated unaudited financials for the quarter ended September 30, 2021. Some of the key highlights are discussed here.
Revenue
Net revenues in the third quarter of 2021 were $2.2 million in comparison to $1.2 million in the same year-ago period. The company recorded an incline of 75% in its year-over-year net revenue.
EPS
Basic and diluted net loss per share in the third quarter of 2021 was $8.9 million or $0.76 versus $3.9 million or $5.89 in the same quarter of 2020. The company observed an improvement in its EPS over the year by 677%.
Conclusion
The stock price of DBGI is 42% down the past year as the economy faced severe regression in the pandemic. Currently, the company’s stock climbed after the announcement of its record revenue gain in January and February. In Monday’s aftermarket session, its stock dipped to shed the gain.
In the current trading session, the shares of Digital Brands Group Inc. (DBGI) stock had surged by 12.90% to trade at the price of $5.95 at last check. The DBGI stock closed the session previously at $5.27. The past 90 days’ average trade volume has been 5.91 million. The DBGI stock volume traded 11.45 million shares. In the past week, DBGI stock has moved down by -8.82%. Furthermore, Digital Brands Group Inc. is currently valued in the market at $55.30million and has 10.49 million outstanding shares.
What are the latest operational maneuvers and financial updates in Digital Brands Group?
On 28th June 2021, Digital Brands Group Inc. released its first-quarter financial results for the financial year 2021 which ended on 31st March 2021.
The overall financial results and balance sheet display the hiccups and continued operation distortion due to the COVID-19’s pandemic. One of the main aims of the company was to make to conserve their market spending and make it more efficiently aligned with the reduced business operations and corporate activities. This was primarily due to COVID-19’s impact on the Bailey 44 which also limited the company’s cash-on-hand and inventory stock.
However, the company expects to see improved results in the second quarter however this improved result is relative to the first quarter and not the same financial performance as pre-pandemic times. The CEO of the DBGI stock Hil Davis stated that the operational improvement in the result will be displayed in the third and fourth quarter of 2021. The amount of cash that DBGI stock has as of now as well as the level of inventory is enough to sustain the expected amount of operational activities for the second, third and fourth quarter of 2021.
The IPO of the company in last May boosted the cash balance and now the main contributors to the increased level of performance for the rest of the year are due to three factors; The company’s DSTLD inventory shipment had arrived in late May with the bulk of the inventory expected to arrive mid of this month till mid of September. DBGI stock has shifted its ship Bailey 44 product to wholesale accounts which started in Mid-May. This boosted the wholesale demand and orders which the company states is equal to the same level as prior to the pandemic.
Lastly, the company is creating a marketing and advertising plan majorly for its latest marketing strategy. This marketing strategy is putting the company’s latest business expansion towards Amazon into the spotlight, as it decides to sell select brands through the largest third-party e-commerce platform. We previously wrote an article regarding this latest expansion and why Amazon is the right move for DBGI stock’s expansion.
Closing of the proposed underwriter’s over-allotment option
The company also announced (28th June 2021) that it has closed the remaining over-allotment option for the underwriters who had purchased an additional 361,445 shares at $4.15 per share. A total of 2,771,084 shares of DBGI’s common stock have been sold for a gross aggregate of $11.5 million. This proposed offering was closed on 18th May.
In the current trading session, Digital Brands Group Inc. (DBGI) shares had surged by 49.88% to trade at the price of $6.13 at the last check. DBGI stock previously closed the session at $4.09. The DBGI stock volume traded 30.99 million shares. In the past week, DBGI stock have moved up by 21.01%. Furthermore, Digital Brands Group Inc. is currently valued in the market at $42.92 million and has 10.49 million outstanding shares.
About Digital Brands Group Inc.
Digital Brands Group Inc. is an Apparel-retail company that specifically focuses on the provision of apparel that belong to various brands. The companies sale channel consist of DTC (Direct-to-consumer) and wholesale basis. DBGI is a digitally native vertical brand and has a network of third-party manufacturers that assist in the procurement and sourcing of clothes which are then directly sold through their e-commerce website to the end consumers. The company also sells to specialty stores, specific department stores and franchises in a wholesale bundle. The diverse product offering on the company includes denims, luxury suits, and women’s tops, dresses, bottoms, jackets, and rompers. All of these product offerings are listed and sold under branded names like DSTLD, ACE Studios, and Bailey brand. The company was previously named Denim.LA Inc. and was founded in 2012. DBGI stock’s headquarter is established in Austin, Texas.
DBGI expanding its business through third party ecommerce platforms and acqusitions
The pandemic has shifted the businesses and retail product consumption towards online shopping on ecommerce platforms and with the recovery of the economy along with the rolling of vaccinations consumers are making bold consumption decisions and demands. This is the ideal time for retail companies to expand and grow their e-commerce business.
Digital Brands Group has taken a page from this strategy and taken to Amazon to expand their online business. DBGI stock announced today that it will allow select brands to be sold onto the platform of Amazon from this fall. The platform of Amazon is an ideal opportunity for expansion since according to a Wells Fargo report Amazon has taken the throne from Walmart as the top apparel seller in March. The sales of apparel and footwear incremented by 15% in 2020 and is 20%-25% above rival Walmart valued at $41 billion.
DBGI stock had previously announced that it had entered into a non-binding agreement with an elevated basics brand known as stateside. The company had announced on 15th June 2021, that intends to enter a binding agreement within 30 days for acquisition which will be done through a transaction of cash and equity to Stateside. The main strategy for this acquisition is to fortify their vision of expansion since their IPO for growing brand portfolios.
Stateside is a Los Angeles-based company that has already a well-established network of local manufacturing through the community of Los Angeles. DBGI stock’s aim was to expand into an omnichannel and create its own channel of distribution as well as manufacturing.
