Digital Brands Group plans to expand its business offline.
The company — which owns brands such as Stateside, Bailey 44, Sundry and others — is planning to open 50 stores over the next several years. The stores will be funded by Digital Brands’ internal free cash flow, according to a Thursday press release.
“We believe the best performing retail brands will have three legs to their growth story: (1) wholesale, (2) e-commerce and (3) retail stores,” CEO Hil Davis said in a statement. “We believe these stores will also drive revenue in our wholesale and e-commerce channels based on data from other brands who have opened retail stores.”
The company said it has been reviewing store leases and locations with “several large-scale retail developers.”
Digital Brands said the stores will drive brand awareness, lead to higher average basket size and help with customer acquisition and retention. The company forecasts that each store will generate over $1.5 million annually with positive cash flow. With 50 stores within its fleet, the company expects to generate over $75 million annually in revenue and store-level cash flow.
In an announcement earlier in the week, Digital Brands said it signed a letter of intent to open its first store in March. The company said it will use the store to clear excess inventory at a higher margin than if it were to sell via an off-price channel.
The company said it already has “a significant amount of excess inventory with its Sundry acquisition” to sell in the store. Digital Brands expects this store to generate over $500,000 in annual cash flow.
In its most recent quarter, Digital Brands Group reported third-quarter net revenue increased 22.5% year over year to about $3.3 million. The company’s net loss grew 11% year over year to $5.4 million, while its operating loss increased 40% to $3.4 million.
Digital Brands in November announced its board of directors initiated a formal review to explore strategic alternatives.
The company earlier this month released financial projections for the year. Digital Brands expects fiscal 2024 revenue to be between $27 million to $30 million. For the first quarter, the company projects revenue will be about $6 million, based on $4.5 million in confirmed wholesale bookings.
