Digital Brands Group, Inc. (NASDAQ: DBGI, $DBGI) stock is catching a bid, up about 10% over the past week. And the better news is that there could be plenty more of the bullish bias in the coming weeks after $DBGI updated investors that its acquisition of Sundry should close next quarter and require less cash and equity to complete the transaction.
Updated terms of the revised agreement give Sundry membership interests an exchange for all such interests for (i) $5.0 million in cash, (ii) $7.0 million paid in either cash or equity, at the option of the Sellers at the Issuance Price, and (iii) $20.0 million in equity valued at the Issuance Price. Digital Brands Group added that it has received several options for debt financing to cover the capital cost of the acquisition and that company stockholder approval will be required to close the transaction, which, as noted, is now expected to close in the third quarter.
The deal is by all measures transformative to DBGI.
Sundry Adds Revenue And Brand Strength
Post-acquisition, Sundry revenues are expected to be immediately accretive to EBITDA. Keep in mind that Sundry is no small contribution. Sundry generated $22.8 million in revenue in 2021 versus $19.9 million in 2020, a 14.5% increase year-over-year.
In addition to adding significant revenues, Sundry is expected to drive more brand awareness and customer demand, which should fuel future growth across its platform, brands, and customers and, at the same time, help create meaningful synergies between all its portfolio brands. That should significantly lower customer acquisition costs and increase customer retention, annual spend per customer, and lifetime value per customer.
From a brand perspective, Sundry will add a strong omnichannel women's lifestyle apparel brand to the DBGI portfolio. The company was founded in 2011 and offers distinct collections of women's clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms, and accessories. Sundry's products are coastal casual and consist of soft, relaxed, and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.
The brand also fits in nicely with other portfolio assets. Analysts are taking notice.
Analyst Likes The Combination
One at Goldman Small Cap Research expects a massive increase in the DBGI share price, modeling for growth to come through an uptick in sales and continued sales momentum from its flagship brands, including Bailey 44, DSTLD, Harper & Jones, and Stateside.
Remember, too, that Digital Brands Group is backing up that bullish report. 2021 revenues increased by 44% over comparative 2020. Better yet, DGBI's 2022 guidance projects the company's revenues to skyrocket from $7.6 million to nearly $45 million. In fact, post-IPO of Sundry, that number could stretch as high as $52 million, according to a revised DBGI forecast. Still, there's more to the DBGI story.
Business Model Ripens DBGI For 2H 2022
Increased sales aren't the only driver of success for Digital Brands Group. The company's digitally native-first business model's cost savings are expected to significantly strengthen DGBI's margins by taking command over distribution, efficiently using existing supply lines, and leveraging a direct-to-consumer sales model to minimize business costs. With these cost reductions in mind, Digital Brands could very well generate EBITDA positive results ahead of schedule, even as soon as the end of Q4.
And the expectations for 2023 get even better. DBGI is guiding for 2023 revenues to increase substantially, with contributions from existing and newly acquired assets potentially helping revenues ramp toward $78 million. If so, prices at current levels are more than attractive; they may be too good to ignore. And for those investors playing the wait-and-see game and staying on the sidelines pre-Sundry closing may be timing a window of opportunity that can and likely will close quickly.
Indeed, those following DBGI stock know that triple-digit percentage gains aren't unlikely after the company posts positive updates. And make no mistake, the closing of Sundry will be news the bulls should and likely will embrace, which could ultimately send shares stampeding higher.
Disclaimers: Level3Trading is responsible for the production and distribution of this content. Level3Trading is not operated by a licensed broker, a dealer, or a registered investment adviser. It should be expressly understood that under no circumstances does any information published herein represent a recommendation to buy or sell a security. Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The information made available by Level3Trading is not intended to be, nor does it constitute, investment advice or recommendations. The contributors may buy and sell securities before and after any particular article, report and publication. In no event shall Level3Trading be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or made available by Level3Trading, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information in this video, article, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. Level3Trading strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D. For some content, Level3Trading, its authors, contributors, or its agents, may be compensated for preparing research, video graphics, and editorial content. As part of that content, readers, subscribers, and website viewers, are expected to read the full disclaimers and financial disclosures statement that can be found Level3trading.com/disclaimers. Contributors to Level3Trading.com are compensated by Trending Equities to produce content for the Level3Trading.com website. Contributors have no direct financial relationship with any companies featured . Contributors reserve the right, but are not obligated to, submit articles for fact-checking prior to publication. Contributors are under no obligation to accept revisions when not factually supported. Furthermore, because contributors are compensated, readers and viewers of this content should always assume that content provided shows only the positive side of companies, and rarely, if ever, highlights the risks associated with investment. Thus, readers and viewers should accept the content as an advertorial that highlights only the best features of a company. Never take opinion, articles presented, or content provided as a sole reason to invest in any featured company. Investors must always perform their own due diligence prior to investing in any publicly traded company and understand the risks involved, including losing their entire investment.
The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results.Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled.
Company Name: Level3Trading.com
Contact Person: K. Kellis
Country: United States