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DBG Plans to Open 50 Retail Stores Over Next Several Years Funded By Internal Free Cash Flow

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Digital Brands Group, Inc. (DBG) plans to open 50 retail stores in the next few years, funded by internal cash flow. The company believes the stores will drive brand awareness, lower customer acquisition costs, and increase customer retention. With a projected $1.5 million in annual revenue per store, DBG anticipates a total of $75 million in annual revenues from the fleet of stores. CEO Hil Davis sees retail stores as a key part of the company's growth strategy, alongside wholesale and e-commerce.
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The announcement by Digital Brands Group, Inc. (DBG) regarding the opening of 50 retail stores and the expected revenue generation of $1.5 million per store annually reflects a strategic expansion into brick-and-mortar retail. This move signifies an investment in an omnichannel approach, aiming to bolster brand presence across different sales platforms. The projected $75 million annual revenue from these stores indicates a substantial increase in the company's revenue streams, considering DBG's reported revenue of $10.7 million for the fiscal year 2020.

Historically, the retail sector has seen a shift towards online shopping, but DBG's strategy suggests a belief in the synergy between physical stores and digital platforms. The assertion that retail stores will lead to lower customer acquisition costs, higher average basket sizes and improved customer retention is grounded in the 'halo effect' observed when online retailers open physical locations. The anticipated positive store-level cash flow suggests a robust financial strategy, but it remains to be seen how this will translate in the face of current retail challenges such as rising rent costs and the need for differentiated in-store experiences to compete with online shopping conveniences.

DBG's plan to fund the expansion through internal free cash flow is indicative of a healthy liquidity position, which is crucial for self-sustained growth without the need for external financing that could dilute shareholder value. The forecast of $1.5 million in annual revenue per store is an ambitious target, especially for a company that operates in the luxury lifestyle segment, which can be sensitive to economic fluctuations. Investors should monitor the company's quarterly financial reports for early indicators of the new stores' performance and cash flow contributions.

Moreover, DBG's stock (NASDAQ: DBGI) may respond to these projections, but the real test will be the execution of this strategy and the actual financial outcomes. The retail industry operates on thin margins and the cost structure of the new stores will be critical in determining their profitability. Stakeholders should also be aware of the risks associated with physical retail expansion, such as long-term lease obligations and the potential for overestimating market demand.

The three-pronged growth strategy outlined by DBG's CEO, encompassing wholesale, e-commerce and retail stores, is a comprehensive approach that leverages multiple consumer touchpoints. This model can be particularly effective for luxury brands, where the in-store experience plays a significant role in brand building and customer engagement. The emphasis on data from other brands that have opened retail stores reinforces the decision, suggesting an informed strategy based on industry trends.

However, the luxury retail sector is highly competitive and success often hinges on location, in-store experience and customer service. As DBG reviews store locations and leases with large-scale retail developers, the choice of locations and the terms of leases will be pivotal. The ability to adapt quickly to market changes and consumer preferences, which can be more volatile in the luxury segment, is another factor that will influence the long-term success of DBG's retail expansion.

DBG forecasts over $1.5 million per store or $75 million annually in revenues over entire store fleet

AUSTIN, Texas, Jan. 18, 2024 /PRNewswire/ -- Digital Brands Group, Inc. ("DBG") (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today announces that it plans to open 50 retail stores over the next several years, which will be funded by its internal free cash flow. DBG has been reviewing store locations and leases with several large-scale retail developers.

DBG believes retail stores will drive significant brand awareness, lower cost customer acquisition and higher average basket size and customer retention.  Based on the store metrics in these developments, DBG forecasts the stores to generate over $1.5 million annually per store with positive store level cash flow.  Based on the 50 store openings, DBG forecasts the fleet of stores should generate over $75 million annually in revenues and meaningful store level cash flow.

"We are excited to announce the retail store phase of our growth strategy. We believe the best performing retail brands will have three legs to their growth story: (1) wholesale, (2) e-commerce and (3) retail stores. We believe these stores will also drive revenue in our wholesale and e-commerce channels based on data from other brands who have opened retail stores," said Hil Davis, Chief Executive Officer of Digital Brands Group.

Forward-looking Statements

Certain statements included in this release are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting DBG and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "should," and "may" and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding DBG's plans, objectives, projections and expectations relating to DBG's operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. DBG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of DBG to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel and accessories; disruption to DBGs distribution system; the financial strength of DBG's customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; DBG's response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers; manufacturing and product innovation; increasing pressure on margins; DBG's ability to implement its business strategy; DBG's ability to grow its wholesale and direct-to-consumer businesses; retail industry changes and challenges; DBG's and its vendors' ability to maintain the strength and security of information technology systems; the risk that DBG's facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; DBG's ability to properly collect, use, manage and secure consumer and employee data; stability of DBG's manufacturing facilities and foreign suppliers; continued use by DBG's suppliers of ethical business practices; DBG's ability to accurately forecast demand for products; continuity of members of DBG's management; DBG's ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; DBG's ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; adverse or unexpected weather conditions; DBG's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent DBG from fulfilling its financial obligations; and climate change and increased focus on sustainability issues. More information on potential factors that could affect DBG's financial results is included from time to time in DBG's public reports filed with the SEC, including DBG's Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

About Digital Brands Group
We offer a wide variety of apparel through numerous brands on a both direct-to-consumer and wholesale basis. We have created a business model derived from our founding as a digitally native-first vertical brand. We focus on owning the customer's "closet share" by leveraging their data and purchase history to create personalized targeted content and looks for that specific customer cohort. 

Digital Brands Group, Inc. Company Contact
Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047

Related Links
https://ir.digitalbrandsgroup.co

 

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SOURCE Digital Brands Group, Inc.

Digital Brands Group plans to open 50 retail stores in the next several years.

The retail stores will be funded by Digital Brands Group's internal free cash flow.

DBG forecasts over $1.5 million annually per store.

DBG anticipates the fleet of stores to generate over $75 million annually in revenues.

CEO Hil Davis sees the best performing retail brands having three legs to their growth story: wholesale, e-commerce, and retail stores.
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