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Digital Brands Group (DBGI) shares rallied 17% to close at $5.27 on July 7.
Digital Brands, which made its Nasdaq debut on May 14, 2021, is an apparel retailer that specializes in providing clothing from a variety of brands on a wholesale and direct-to-consumer basis. The company sources products directly from third-party manufacturers and sells them to consumers. Digital Brands leverages consumer data to offer targeted content in its online shops, and has also expanded into wholesale and retail storefronts.
The company is putting forward all efforts to create a foothold in this extremely competitive ecommerce sector, as enterprises and retail goods consumption is rapidly shifting to online buying on ecommerce platforms.
With a market capitalization of $55.8 million, the company has gained 71% in the past month and 55% over the past year. (See DBGI stock chart on TipRanks)
Let's figure out why Digital Brands has been making the headlines for some time now.
Q1 Earnings Details & Optimistic Management Commentary
On June 28, Digital Brands reported its first-quarter numbers for the financial year 2021.
The company posted a Q1 adjusted net loss of $4.55 per share. A loss of $2.87 per share was reported in the same quarter last year.
Net sales were $408,000 versus $2.6 million in the year-ago quarter. The decline was due to the delay in starting its new Bailey 44 designer brand, and limited inventory at DSTLD due to limited cash.
Digital Brands Group CEO Hil Davis said, "We expect to see improved operating results in the second quarter and significantly improved operating results in the third and fourth quarters of 2021 now that we have sufficient cash and inventory to support expected levels of operations."
Davis added, “We expect the second quarter to be better than the first quarter, with the bulk of the post-IPO benefit coming in the third quarter and going forward as the inventory is 100% in stock, the marketing strategy is in full force and Bailey-44 wholesale shipments are back to pre-pandemic levels."
Despite the hurdles and ongoing operational disruptions caused by the COVID-19 outbreak, the CEO was hopeful about the company's future prospects.
The company expects revenues from Harper & Jones, Bailey 44, and DSTLD to all increase in the second half of 2021. Also, revenues from Harper & Jones are expected to be included in the upcoming quarter. Harper & Jones was acquired as part of the IPO.
Following the earnings results, Digital Brands' shares surged 10%.
Expansion Continues With Full Force
On June 24, Digital Brands announced that it plans to allow select brands to be sold on Amazon’s e-commerce platform.
Given Amazon's dominance in the retail business, Digital Brands’ presence on Amazon’s e-commerce platform is bound to increase its brand awareness, leading to higher sales numbers.
Digital Brands’ Chief Marketing Officer Laura Dowling said, "Our data gives DBG great confidence we can hit above average conversion rates at a cost for customer acquisition compared to industry standards, we look forward to sharing the results of this project in the coming months."
In yet another move to grow its business, Digital Brands said on June 15 that it had reached a non-binding agreement with Stateside, a privately-owned clothing brand that sells elevated basics.
The agreement is likely to strengthen Digital Brands' plans to increase its brand portfolios. The deal, if it materializes, is also expected to be accretive to the company’s financials.
TipRanks Vital Metrics
Digital Brands scores a 5 of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market averages.
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Digital Brands, with 59.6% of investors who hold portfolios on TipRanks increasing their exposure to DBGI stock over the past 30 days.
Digital Brands Group, which is digitally integrated through the entire manufacturing and sales channel, seems to have a great future in the retail industry.
With plenty of cash on hand following the IPO, the company's focus on acquiring attractive brands to grow its apparel brand portfolio should be rewarding in the future.
To summarize, it seems that DBGI is doing the right things at the right time in this era of digitization and increased online buying activity. Investors might find this stock worthwhile.
Disclosure: Shalu Saraf does not have a position in Digital Brands Group stock.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.