Although Digital Brands Group, Inc.'s (NasdaqGS: DBGI) more than 15% June surge is impressive, recent updates suggests that the move could be the start of an even bigger advance into the back half of 2021. In fact, with its high-margin high-profit business model already churning revenues, DBGI could do more than create shareholder value...they can influence change to a billion-dollar industry.
Indeed, DBGI is out to do things differently. And with analysts expecting that the apparel industry will experience a substantial snap-back rally as COVID restrictions ease, DBGI's intentions to change how fashion is sourced, created, and sold are attracting a significant amount of industry and investor attention. Better still, with a considerable shift toward online purchasing gaining momentum, Digital Brands Group's strategy to enhance its digitally-focused approach to sales is not only timely but could also be a revenue-generating game-changer for the company.
Best of all, with its $10 million underwritten public offering complete and several high-powered brands in its portfolio, that growth could come sooner rather than later. In fact, an LOI announced yesterday to acquire Stateside, a privately-owned elevated basics brand, is keeping its acquisition momentum in high gear. Thus, while its June gains are indeed valued earned, they could be a prelude for even more significant increases later this year.
And for investors taking advantage of current prices, that could be excellent news.
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A Digitally-Focused Business Model To Maximize Sales
Although DBGI isn't the pioneer of direct-to-consumer sales, its method is. And with a strategy designed to maximize every dollar of revenue earned through streamlined operations, both the company and its investors could be exceptionally well rewarded in the near and long term.
Even better, with a business plan centered around acquiring and accelerating the growth of talented brands and maintaining the ability to source, manufacture, and sell at high margins, those rewards could be close at hand.
In fact, three brands in its portfolio are already making a statement by bringing fashion-forward, socially conscious designs direct to its customers. And DBGI believes that combining its brand quality with its streamlined business model demonstrates what they think will be the future of retail. Better still, by cutting out most, if not all intermediaries, DBGI could be setting a new industry standard while simultaneously maximizing its revenues.
Notably, its popular Bailey 44 line of apparel shows that the "future of retail" could already be here. This brand proves the sales model works, targeting customers with apparel influenced by LA's urban architecture and iconic landscapes. And similar to other portfolio assets, Bailey 44 integrates modern details, classic elements, and fashion-forward designs that combine luxe fabrics and on-trend designs to create sophisticated ready-to-wear apparel for women on the go. Its Haven Vegan Leather top, for instance, takes the "art of nonchalance" to another level by not only being beautifully designed and worn but also being a socially conscious brand. It's the combination of the two that makes it a perfect fit in the DBGI brand arsenal.
Of course, the value from its DSTLD brand can't be understated, either. Launched in 2014, this ethically produced, well-crafted clothing line shows that high-quality doesn't mean cost-prohibitive. In fact, taking inspiration from the creatives that constitute Los Angeles (filmmakers, writers, entrepreneurs, artists, and designers), DSTLD brings to market a contemporary brand based on the modern elements of style and function: Jeans, t-shirts, and other luxury-level basics that no person can live without. Most important to the investment proposition is that this stylish yet simplistic approach focused on sustainable manufacturing methods is much more than a comfortable brand; it can be a substantial value driver to DBGI in the coming quarters. There's more.
Also, expect ACE Studios and the value from its custom and made-to-measure suiting and sportswear company, Harper and Jones, LLC., to contribute substantially as well. In fact, expect Digital Brands Group's entire portfolio of luxury lifestyle, digital-first brands to contribute to near-term revenue growth. And with its commitment to bring together like-minded direct-to-consumer names under one portfolio sharing operational, infrastructure, and data resources to drive down redundant fixed costs, the contribution from each can be more than substantial; it can be impactful.
Better still, the brands in its portfolio represent a starting point. So don't expect DBGI to slow down on new brand acquisitions. In fact, with ample cash on hand, it's a big part of their strategy.
Growth Through Accretive Acquisition
Indeed, the company's range of apparel is more than attractive; it's generating revenues. And for investors, those are golden words. But making those revenues more impactful is that they are met with a streamlined, low overhead, vertically integrated business model that controls a transaction from procurement to sale. The end result there is that with very few, if any, intermediaries handling the products that drive up costs, DBGI can offer high-end fashions at affordable prices. However, while DBGI can sell top styles at affordable prices, don't think of them as a discount retailer. The reason they can sell competitively is that its high margin, high-profit business model allows them to do so. And DBGI intends to leverage that advantage.
In fact, DBGI would be the first to say that its business model is designed for growth by working from a platform that can manage and sell numerous brands on a direct-to-consumer and wholesale basis. That ability comes through a strategy that utilizes a digitally native-first vertical approach to brand sales. What's that mean?
Simply put, digital native-first brands are brands founded as e-commerce driven businesses that utilize the power of online sales to develop their client base and revenues. As these brands get more popular, they can even expand into wholesale or direct retail channels. DBGI intends to take the best parts of each model and roll them into one highly effective sales model.
And while DBGI may appear similar to traditional online retailers, they are, in fact, taking a different approach from typical e-commerce businesses, like online sellers Naked Brands, Inc. (NASDAQ: NAKD) and multi-brand giant Macy's, Inc. (NYSE: M), by acting as a digitally native vertical operation, controlling its own distribution, sourcing its products directly from third-party manufacturers, and selling direct to the end consumer. Thus, as noted, the inherent value of the model creates high margined, low overhead sales.
The best news is that the power of its brands, and the ability for DBGI to seamlessly add new ones, positions DBGI to become a much larger company sooner than some may expect. Therein lay the value proposition.
However, with DBGI intent to find and close on accretive acquisitions, the current valuation disconnect may soon evaporate. The 15% surge thus far in June shows that happening already.
Right Business Model For The Times
Indeed, Digital Brands Group is attracting investor attention. And with its IPO complete, combined with its history of pre-IPO success, DBGI looks better positioned than ever to capitalize on several market opportunities.
In fact, its experienced management team is already showing a unique understanding of how style, logistics, social media, and its consumers contribute to a common revenue-generating goal. Their experience alone makes a case for a considerably higher market cap.
Thus, it's hard to disagree with investors that the sales model, brand portfolio, and carefully planned strategies could align to create an online apparel company juggernaut. And while shares have seen some post-IPO weakness, it's evident that the long-term storyline is intact- DBGI has the means, money, and methods to generate potentially exponential value in the coming quarters.
Indeed, that makes DBGI ripe for investment consideration.
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