After completing its recent IPO, Digital Brands Group, Inc. (NasdaqGS: DBGI) made clear that it will be intensifying its mission to acquire compelling and complementary brands to add to its growing brand portfolio. So far, management has delivered. In fact, its acquisition of leading elevated basics brand, Stateside, is likely the beginning of what could be an extraordinary period of growth for DBGI in the back half of this year. And investors are buying into the story, sending shares higher by 24% month-to-date in June*. Better still, with DBGI showing it knows how to build value through savvy acquisitions, the stock appears to be on its way toward reclaiming its February IPO high of $5.10 per share, which could deliver a roughly 44% gain from current levels. (*price percentage change calculated on 6/22/21 at $3.54 per share)
Indeed, DBGI is not only building its brand portfolio but is doing so in a way to maximize revenues from a streamlined digitally-focused approach to sales and manufacturing. Moreover, with sector analysts suggesting that the apparel industry is likely to benefit from a robust snap-back rally as supply and distribution channels recover from pandemic-created obstacles, the timing couldn't be better. And combining that expected rally with a business model designed to maximize every dollar of revenue puts DBGI in an ideal position to deliver near and long-term value to its shareholders.
Keep in mind, too, DBGI's mission is about more than driving revenues; they want to prove that its business model can change how fashion is sourced, created, and sold. Of course, if successful, the results benefit both the company and its shareholders, which could be why investors are bidding shares higher. Also, with a considerable shift by consumers toward online purchasing gaining momentum, DBGI is in the right market at the right time to keep investor interest in play. Better still, as the company adds to its brand portfolio, that interest could get much stronger.
Its recent LOI to acquire Stateside could be one reason for the recent surge. If so, modeling for future share price increases shouldn't be difficult. Just follow the news.
Video Link: https://www.youtube.com/embed/5cQPP8jHNV4
Maximizing The Process Through Digital Means
Indeed, DBGI is showing that direct-to-consumer sales are more than servicing customers through a website. While a sale is the desired end result, DBGI is taking its digitally-focused strategy a step further to utilize its benefits to maximize every dollar of revenue earned through streamlined operations. In other words, the sale results from DBGI leveraging digital technology to maintain the ability to source, manufacture, and sell at high margins. Thus, the entire model works seamlessly from concept to sale. And that's how to make money.
The more excellent news is that DBGI is doing that now. In fact, its three portfolio brands are already making a statement by bringing fashion-forward, socially conscious designs direct to its customers. And the expected addition of Stateside would add yet another value driver. Still, while the brands attract business, for investors, the value comes from DBGI combining brand quality with a streamlined business model. More specifically, by cutting out most, if not all intermediaries, DBGI could see profits sooner rather than later. And that's the attraction from an investor's perspective. However, its brands are compelling as well, and consumers are also paying attention.
An already popular brand is Bailey 44, an apparel line showing that the "future of retail" could already be here. This brand does more than maximize revenues for the company; it offers consumers a high-end style and function at a competitive price. And with its fashions influenced by LA's urban architecture and iconic landscapes, this brand earns loyalty from clients wanting modern details, classic elements, and fashion-forward designs that combine luxe fabrics and on-trend styling to create sophisticated designs ready-to-wear apparel for women on the go. More than exciting to wear, the brand is also a socially conscious manufacturer, using vegan leather and responsibly sourced materials to take the "art of nonchalance" to another level. It's the combination of the two that makes it a perfect fit in the DBGI brand arsenal.
Another top brand in the portfolio is DSTLD. Launched in 2014, this ethically produced, well-crafted clothing line shows that high-quality doesn't mean cost-prohibitive. Taking its inspiration from the creatives that constitute Los Angeles (filmmakers, writers, entrepreneurs, artists, and designers), DSTLD markets a contemporary brand based on the modern elements of style and function: Jeans, t-shirts, and other luxury-level basics that make up the smart-casual wardrobe. Like Bailey 44, DSTLD combines its stylish yet simplistic approach to fashion with sustainable manufacturing methods making the brand more than comfortable; it's an eco-friendly value driver as well. There's more.
Coming online as well is ACE Studios, a brand specializing in custom and made-to-measure suiting. Also, Harper and Jones, LLC., is expected to contribute substantially as well. In fact, the great news is that there is no wasted space in the brand portfolio; thus, Digital Brands Group's entire portfolio of luxury lifestyle, digital-first brands are expected to contribute to near and long-term revenue growth. And keeping in mind that DBGI is bringing like-minded direct-to-consumer names under one portfolio that share operational, infrastructure, and data resources to drive down redundant fixed costs, those revenues can be immediately impactful.
Best of all, the brands in its portfolio represent a starting point. And with ample cash on hand following its $10 million IPO, expect more acquisitions during the back half of this year.
Acquisition Model To Drive Growth
In fact, its LOI with Stateside is likely only the start of a busy remainder of 2021. And the great news is that DBGI adds another point of revenue to its books when that deal closes. It will also add to its other brands that are doing the same.
Better still, from a valuation perspective, those revenues are met with a streamlined, low overhead, vertically integrated business model that controls a transaction from procurement to sale. As noted, the end result is that with very few, if any, intermediaries handling the products driving 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. They can deal effectively because its high margin, high-profit business model allows them to do so. And DBGI's business model is built around that advantage.
In fact, DBGI is expanding its market presence through a business platform designed to maximize profits and manage and sell numerous brands on a direct-to-consumer and wholesale basis. That's where the digitally native-first vertical approach to brand sales comes into play. What's that mean?
Simply stated, digital native-first brands are brands that originated as e-commerce driven businesses, utilizing the power of online sales to develop their client base and revenues. As these brands get more popular, they can grow further by sometimes expanding into wholesale or direct retail channels. It's a combination of the two that can accelerate DBGI brand growth. And by using the best parts of each model, DBGI can maximize and accelerate growth through a highly effective and efficient sales model.
Keep in mind that brands are following in the same direction. Earlier this month, Naked Brands, Inc. (NASDAQ: NAKD) announced its divestiture of Bendon, Ltd. in a move to shed the high operating costs associated with a brick-and-mortar business. Also, brand giant Macy's, Inc. (NYSE: M) is taking on a more digitally focused presence, also trying to capitalize on the shift in consumer behavior. Of course, Macy's may be stuck trading in traditional channels. And NAKD may also have a hard time shifting toward a pure digitally native vertical operation. However, DBGI won't have the same issues. Instead, they control their own distribution, source products directly from third-party manufacturers, and then sell directly to the end consumer. Thus, as noted, the inherent value of the model creates high margined, low overhead sales.
The excellent news is that the power of its brands, combined with the ability to seamlessly add new ones, positions DBGI to become a much larger company sooner than some may expect. Therein, despite the 24% gain this month, more is expected.
And with its ambition to grow faster through smart and accretive acquisitions, clawing back to and exceeding 52-week highs may be closer than many think.
Right Business, Right Time
Indeed, Digital Brands Group stock is on a roll. However, the great news is that momentum is at the company's back. Better still, with its IPO complete, having a stable of excellent brands with more on the way, and its industry expertise, DBGI appears better positioned than ever to capitalize on emerging market opportunities.
Thus, it's hard to disagree with the investors responsible for sending shares substantially higher in June. Perhaps they recognize that the DBGI sales model, brand portfolio, and acquisition strategy align to create an online apparel company with the potential for exponential near and long-term growth.
Indeed, DBGI has the means, money, and methods to meet that expectation, making shares more than ripe for investment consideration at current levels.
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