The shares of Digital Brands Group, Inc. (NASDAQ: DBGI) demonstrated a noteworthy surge during the extended trading session on Tuesday, marking a robust 6.37% increase to reach $2.67. This upswing followed a regular-session 3.50% rise, concluding Digital Brands’ stock at $2.51. The impetus for this surge in DBGI stock can be attributed to the company’s recent disclosure of expansion initiatives.
Digital Brands (DBGI) has outlined its intention to inaugurate 50 retail establishments over the next few years, financing this venture through its internal free cash flow. The company has diligently assessed potential store locations and lease agreements in collaboration with prominent retail developers.
DBGI is sanguine about the substantial enhancement of brand visibility, cost-effective customer acquisition, augmented average basket size, and heightened customer retention that retail stores can bring. Based on the anticipated metrics from these establishments, Digital Brands envisions an annual revenue exceeding $1.5 million per store with positive cash flow at the store level.
Extrapolating from the 50-store strategy, DBGI anticipates an aggregate annual revenue surpassing $75 million and consequential store-level cash flow. Furthermore, these planned retail stores are anticipated to bolster revenue across Digital Brands’ wholesale and e-commerce channels, drawing insights from the performance of similar brands with retail presence.
In a recent development, Digital Brands has formalized its commitment to opening its inaugural retail store in March, projecting annual revenue surpassing $1.5 million and annual cash flow exceeding $500,000. These estimates are derived from historical metrics and the performance of this particular store, considering excess Sundry inventory preceding the acquisition.
DBGI strategically plans to utilize this retail outlet to liquidate surplus inventory, realizing significantly higher profit margins compared to off-price channel sales. Notably, DBG has inherited a substantial amount of excess inventory through its Sundry acquisition, with no additional costs associated, as these units have already been paid for and are housed in its warehouse.
Consequently, the company foresees substantial annual cash flow exceeding $500,000 from this store. The decision to initiate with an outlet location is rooted in the availability of finished goods inventory already paid for and stored in the warehouse, coupled with the favorable historical metrics and performance of this store.
