Dive Brief:
- Primarily due to full results from the acquisition of Sundry, Digital Brands Group’s net revenue during the first quarter increased 48% year over year to about $5.1 million, according to a Monday filing. Net loss decreased 22% to $6.14 million, in part due to higher gross profit from the Sundry acquisition and fewer operating expenses.
- The company’s loss from operations decreased 36% to $3.58 million while its inventory during the quarter fell by nearly 6% to $4.93 million. Additionally, gross margin increased year over year from 33.2% to 47.9%.
- Digital Brands Group CEO Hil Davis said on a call Monday that the company expects to reach positive EBITDA by this fall. Davis said the company will launch a proprietary affiliate program in August and grow its multi-brand store footprint, using free cash flow to open five stores annually for the next few years. The chief executive said Digital Brands Group believes it can operate over 50 stores.
Dive Insight:
Digital Brands Group — which also owns DSTLD, Stateside, Harper & Jones and Bailey 44 — is looking toward physical retail expansion and affiliate sales to fuel its growth this year.
“We believe both channels will increase our e-commerce and wholesale revenue as these channels will increase brand awareness and customer acquisition,” Davis said on the call. “And we believe our membership program, which will launch in the second half of June ... will drive customer retention and repeat purchases.”
In April, the company reported its fourth-quarter revenue declined by 15.8% year over year to $3.4 million, while net loss increased from $9.7 million to $15.8 million. For the full 2022 fiscal year, Digital Brands Group’s net loss increased from $32.4 million to $38 million.
The company’s annual report filed in April showed that it was in technical default on at least two promissory notes with aggregate principal amounts worth millions of dollars. Digital Brands Group had noted it was unable to repay or refinance the borrowings “so any such action by these lenders could force us into bankruptcy or liquidation.” Its latest quarterly filing on Monday shows it is still in technical default on these notes, though “the parties are undergoing an extension of the maturity date” on one of them.
