Digital Brands Group (DBG) — the parent company of a collection of digital-first lifestyle brands including Bailey 44, Harper & Jones and Sundry — will open its first physical store in March 2024 and plans to have 50 locations within the next several years. For DBG, which already has ecommerce and wholesale distribution for all of its brands, stores represent the missing piece of the puzzle.
The company has signed a letter of intent to open its first retail store, which will be an outlet location, although details of where the store would be located were not shared. DBG said it will use this first store to “to clear excess inventory at a meaningfully higher margin than selling into the off-price channel,” noting that it received a significant amount of excess inventory with its Sundry acquisition in late 2022.
Because the first store will be stocked with product that is already paid for and in DBG’s possession, the company predicts that the store will generate over $1.5 million in annual revenue and annual cash flow of over $500,000 a year.
But this first store won’t be a one-off; the company plans to open a total of 50 stores over the next several years, all funded by internal free cash flow, and has already begun reviewing potential locations and leases with several large-scale retail developers.
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In August 2023, DBG’s board of directors launched a formal review to explore “strategic alternatives” for the company in order to address “the continued dislocation between Digital Brand Group’s public market value and the intrinsic value of Digital Brands Group’s underlying assets,” said DBG CEO Hil Davis in a statement at the time.
The board clearly decided that stores are at least part of the answer, with the company anticipating that “retail stores will drive significant brand awareness, lower-cost customer acquisition and higher average basket size and customer retention.”
“We are excited to begin the retail store phase of growth strategy,” said Davis in a statement about the store plans. “We believe the best performing retail brands will have three legs to their growth story: wholesale, ecommerce and retail stores. We started with an outlet location due to the finished goods inventory that are already paid for and sitting at our warehouse, as well as the historical metrics and performance of this store.”
DBG forecasts that each store will generate over $1.5 million annually. Based on the target of 50 stores, this would mean over $75 million annually in revenues.
